It’s interesting to follow changes in the economy with how mortgages have changed. Still, it already covers a large percentage of the population and with many it will be for a long time. Now it’s as important a part of life as school (timing, of course) or health issues (you always need to be alert, prevention is better than cure) for kids, for example. People even celebrate their mortgage anniversaries. I am not kidding. They’re getting cake. Gifts are being prepared. Organize an official promotion of early payment. They save three months, suffer three months, reduce the maturity or make the monthly payment again, in the end they choose both and send their hard work into this abyss with the sounds of anthem. Here are the passions.
I had the same anniversary recently. I capture this moment in my own way. Without charm – I still have to pay for a long time, I keep my strength. But I arrange for myself some kind of thematic readings. I look at any analysis, follow trends, compare numbers. I wonder where he went. And you know what to say? The current movement is somehow not cheery at all and the trends are totally sad.
So numbers. In 2022, banks used 15.5% less housing loans compared to the previous year. At the same time, the number of refusals has increased significantly, now almost every second potential borrower, more precisely, 46% of loan applicants, is delivered. Overall, the share of mortgage refusals has been increasing in the country for the past three years. At the beginning of 2020, only a quarter (24.8%) were rejected, in early 2021 – a third (31.5%), the failure rate a year ago was 34.1%. In addition, average mortgage terms have increased at an unprecedented rate. In the new housing market, they exceeded 25 years versus 22 years in 2021 (duration has increased by 9 years in the last five years in total). And all this despite the fact that the average area of apartments bought on credit has decreased from 48 to 44 square meters. m.
What does this statistic mean? To begin with: people’s path to banks is still not overgrown, there are more people willing to take on debt obligations than banks have, so the housing needs of the population are far from being met.
Of course, sometimes we’re talking about some crowd of speculators, ah, sorry, investors who buy rental property. But clearly that is not the case here. After all, we are talking about those who have nothing to speculate, that is, to invest. We are talking about people who collect things for a 10% down payment (or get a consumer loan in return) and want to buy something modest for life on credit. If not for your life, then for your children. Yes, they may also call themselves investors, but you never know who identifies with whom. Investing in real estate today seems like a highly dubious option, so it is unlikely that banks will be raided by some straight businessmen.
But if the need for shelter among Russians is still high, why can’t it be met? Why are so many being rejected now? It’s unlikely that the banks somehow got burned on the mortgage and are now blowing the waters. No matter how predictable the apocalypse was for us in the form of mass sales of mortgaged apartments, nothing like this happened. The share of bad loans in the mortgage sector remains low as usual. There is some increase, but it’s either a third or half a percent. By the way, we can conclude from this that it is absolutely thoughtless not to distribute mortgages to people. This means that the increase in rejections is due to a decrease in the number of potential problem borrowers.
It’s understandable why he owes less well overall. People’s incomes fell and loans became more expensive. Interest rates for the year increased by an average of 2-3%, preferential mortgages were preserved, but they look less and less like preferential mortgages. However, the collapse in housing prices predicted many times has not happened yet. Yes, the prices have froze, pulled back a bit somewhere, but by no means impressive. But the rise in prices in 2020 was impressive. Then the cost of apartments increased where by 30% and where by 50%.
Meanwhile, many mortgage applicants today fell victim to that storm in the real estate market. Many people who were planning to buy a mortgage in 2020 did not have time to do so because the sharp rise in apartment prices lowered the value of the savings that should have been used for the down payment. After all, not everyone was rushing into consumer loans, after all, people expected prices to drop sooner. And as we’ve seen, they’re still holding on. And this despite the fact that not all residential complexes and quarters have already been sold. And it is not a fact that this concrete will be sold at bargain prices tomorrow or the day after tomorrow. On the contrary, the state will again come to the aid of developers, and then buy part of the area for renting apartments to the public. We’ve been talking about the resurgence of social leasing for a long time – here’s the opportunity.
Separately, it is worth mentioning the increasing trend in mortgage maturities. This growth has almost reached its limit. People compensate for the decline in real incomes by stretching debt longer.
Some, of course, just play it safe, withdrawing a loan for the maximum period with a small payment, but from the first days they deposit more than the declared amount every month, hoping to repay the loan faster. A smart strategy in such a volatile time. But are there many who can now try to protect themselves? Indeed, even with the “yawn pleasure” of people for decades, the average monthly payment in 2022 exceeded 26 thousand rubles. These are only Moscow and St. Figures for the whole country, not for St. Petersburg. And this is despite the fact that the average salary in Russia is 57 thousand rubles (that is, 50 thousand rubles remain after deducting personal income tax), the average salary is 39 thousand rubles (net 34 thousand rubles), and the modal salary is 30 thousand rubles.
With this type of income, few people will be able to significantly reduce the duration of their mortgage load. Three or four years ago, bankers used to say that housing loans given in better times in an average of 15 years were paid off in seven years, now these dynamics are unbelievable. Success seems to reduce mortgage terms by at least a third – this is 25 years from today, 7.5 years off that financial hard labor. Of course, considering that the remaining 17.5 years is a lot.
Of course, people console themselves as much as they can. They repeat the mantra that the entire civilized world lives on credit, that even in the West people pay their debts for half a lifetime, that there is no need to rush, that in seven to ten years the current payment will look ridiculous because of inflation. That’s just in countries with a more prosperous economy, loans are paid not for studios, not for forty squares of odnushki, but for life. Yes, and interest rates are still lower in these countries and you can’t rush into paying for a house loan when you don’t pay the cost of three such houses.
But I am one of the consoling ones. At first I paid off my mortgage ahead of schedule, and this year it went off zealously, you know. And I expect the monthly payment to sound ridiculous to me. The point, of course, is that income isn’t even funnier. And they work hard for it.
So it will go – a mortgage will become a sign of solvency. After all, not everyone can plan 20-30 years ahead. And if you plan, they won’t let you. Say, such an honor still needs to be earned. And this, of course, is nonsense.
The author expresses his personal opinion, which may not coincide with the editors’ position.