Bubble Forming in Russia? Mortgage Rates Going Down; People Taking Out Loans
The mortgage boom is overwhelming Russia. Today, the rates in our country are lower than ever. Next year, a mortgage loan will become even more affordable, especially for couples expecting a baby.
Tatyana Remizova has heard everything about it first hand.
- Tatyana, how is it going to get easier for us to deal with that old "apartment issue"?
- Ernest, let me start with the news that this year a record number of Russians have closed that issue. By the end of 2017, 1 mln mortgage deals will have been made totaling 2 trillion rubles. And this is how the Mortgage Credit Agency explains this historical record.
Alexander Plutnik, MCA General Director: "First of all, the overall economic improvement and low key rate played a role. And also, market competition is developing. Banks have to compete for creditworthy clients".
Actually, 2017 has become a watershed year. The average mortgage rate was 12.5% at the beginning of the year, but by November 1 it was less than ten, 9.95%. Buying a new apartment is more profitable, 9.8% on average. The rates for those who buy second-hand are at the average level of 10%.
— OK, but where and when should people go for the rate of 6% which President has promised?
— The President's program starts in 11 days, from January 1, 2018. The families expecting second or third baby will be able to use it. They will have a choice of taking a new loan or refinancing the one they have. It's not difficult to get this privilege, but there are many benefits.
Alexander Plutnik: "You can get it at any bank office which deals with mortgage, in any city of Russia. The procedure remains the same as if you came to take an ordinary loan. For such families, this will result in savings of ₽100,000 per year, and more. For the whole period of loan payment, the final cost of the apartment will be reduced by third, if compared to the current rate".
In the period of 2005-2016, 6 mln Russian citizens have acquired better housing with mortgage.
Today, 35% of Russian families can afford to buy an apartment on credit. By 2025, this number will grow up to 50%. By comparison, in the early 2000s only 1 family out of 20 could afford a mortgage loan. In 7 years, the number of mortgage deals will grow from 1 mln to 2 mln per year.
There will be one new thing in 2018: digital mortgage will substitute paper. Mortgages will become easier to get and cheaper to pay for.
Alexander Plutnik: "For banks, digital mortgage will make issuing and workflow procedures cheaper. Over time, these expenses will be excluded from the loan cost. Housing will become a bit more affordable. New technologies will let clients take loans fully remotely, without a visit to a bank. All the necessary documentation will be issued".
- Tatyana, thank you and the head of MCA for such a useful piece of information. This was Tatyana Remizova