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- Payment and ability: The Central Bank will limit one of the possibilities to take out a mortgage with low payments
Payment and ability: The Central Bank will limit one of the possibilities to take out a mortgage with low payments
Mortgages with the so-called grace period will become less affordable for Russians. We are talking about loans, when the borrower transfers a small monthly payment for one to three years, and then it increases dramatically. The Central Bank plans to oblige banks to create increased reserves for such loans from July 1, 2027, and emphasizes that such schemes are risky. Formally, these programs will not be banned, but they will become less profitable for financial organizations. Therefore, conditions will change for citizens as well. As a result, some buyers may lose one of the few remaining ways to get a mortgage with low payments, at least initially. The extent to which the new measures are justified is described in the Izvestia article.
Which mortgage schemes will be subject to restrictions
The Bank of Russia plans to limit risky mortgages, when the borrower pays small amounts for the first few years, and then his monthly payment increases significantly. According to the regulator's plans, draft amendments to regulatory documents will be released in the first quarter of next year, and the new rules will enter into force on July 1, 2027.
The Central Bank proposes to increase banks' reserves for loans in which payments in the first three years grow by more than 20% relative to the average over the previous 12 months, the regulator's press service told Izvestia. The funds of financial institutions for such loans are planned to be increased by 50 percentage points, according to information from the Central Bank. In addition, the regulator intends to limit the low-payment period to three years. The new requirements will not affect government programs.
"The measure is designed to limit schemes that lead to an overestimation of the price of an apartment. Their essence is that the borrower is offered a supposedly grace period (usually one to two years) when he pays at a low rate (for example, 5%), and at the end of it - at the market rate at the time of issue (now it would be about 18%)," the Central Bank said in a comment. for Izvestia.
The bank receives the lost income from the developer in the early years. He usually puts it in the commission, adding to the cost of the apartment for the client.
"In the end, the buyer pays for everything. But at the same time, the risk increases that a person will not make a payment after the grace period ends," the regulator added.
The new requirements will reduce the availability of mortgages for some Russians, industry experts say. It will become more difficult for those who cannot service a housing loan on a standard schedule to buy an apartment.
According to Valery Tumin, Director of the Russian and CIS Markets at fam Properties, an increase in reserves may make issuing such loans practically unprofitable for banks. Because of this, financial institutions will more carefully check the income of candidates, reduce the available loan amount and may increase down payment requirements, said Vasily Kutyin, Director of Analytics at Ingo Bank. According to Vladimir Chernov, analyst at Freedom Global, as a result, some of the buyers who are currently applying for such a mortgage may not pass the bank scoring at all.
In addition, after the introduction of new requirements, programs with low payments may become more expensive for the developer at the start due to an increase in the commission that he pays to the bank for subsidizing the loan, Valery Tumin noted. Exactly how much the cost of the programs will increase will depend on the size of the additional reserves and how much of the expenses credit institutions and developers decide to take over.
Who will find it more difficult to buy an apartment
There is no accurate data on the prevalence of mortgages with a sharp increase in payments. The Central Bank noted that such programs "are not of a mass nature." But, according to Alexander Ternyushchenko, commercial director of the Dogma construction company, at the beginning of this year, their share in the issuance of new buildings reached 20-30%, depending on the region and the developer. In some segments, this part could be even larger, but it is impossible to transfer such estimates to the entire mortgage market, says Alexey Voylukov, MBA professor of business practice in digital finance at the Presidential Academy.
The restrictions will most strongly affect buyers of new buildings with relatively low or unstable incomes, who find it difficult to service a loan on a standard schedule, said Vladimir Chernov.
A mortgage with a grace period is convenient for families who simultaneously rent a house and pay off a loan for an apartment under construction, Valery Tumin noted. After the move, the rental costs stop, and the released money can be used to service the debt. Due to the new requirements, such clients may lose the opportunity to use a special payment schedule.
But at the same time, low payments at the first stage can turn out to be a really risky scheme for buyers. It was often used by young families, borrowers with a small down payment, and those who hoped for a salary increase or subsequent refinancing, Vladimir Chernov added. It may be dangerous to expect a reduction in loan interest in the future at market rates of about 18-19%.
In some regions, the effect of restrictions on such programs may be stronger due to low household incomes and high housing costs. The changes may be especially sensitive for buyers in large cities, where expensive new buildings are already difficult to purchase on standard market terms, Vladimir Chernov believes.
According to Finam analyst Igor Dodonov, in some programs, the payment may double or more after the end of the start period. An additional danger is created by overestimating the cost of the apartment: the debt to the bank may be higher than the market price of housing, which will make it difficult to sell or refinance the loan.
Increased reserves are needed so that financial institutions take into account the likelihood of such losses in advance, rather than assessing the client's solvency only according to the initial schedule, explained Valery Tumin. Reserves reflect possible loan costs and affect the bank's profit. The measure does not formally prohibit the issuance of such loans, but it makes them less profitable for market participants.
At the same time, the new requirements do not mean an automatic increase in interest rates on the entire mortgage. The key interest rate will continue to have a major impact on the cost of standard market loans, Vladimir Chernov noted.
What will replace a mortgage with a low payment?
Some buyers will be able to switch to a regular mortgage by increasing the initial payment or choosing a more affordable apartment. State preferential programs will remain an alternative for those who meet their requirements. But these options are not able to completely replace schemes with small payments at the initial stage, and some families may postpone the purchase of housing, market participants believe.
Developers are already offering installments as a replacement before the house is put into operation, followed by the transition to mortgages, trade-in and joint programs with banks. But such tools are not suitable for everyone: installments may also involve a large payment in the future, and the ability to get a housing loan by the time the apartment is rented will depend on the buyer's rates and income, warned Tatiana Khalilova, director of sales at GloraX.
Additional restrictions may reduce the demand for new buildings, especially in the mass segment, where the monthly payment directly determines the purchase opportunity, the expert added. At the same time, it is not worth counting on a noticeable decrease in prices following demand: the cost of construction and financing costs remain high.
The new rules of the Central Bank will indeed narrow the choice of mortgage programs, but they should not automatically lead to an increase in the cost of all housing loans, experts agree. The idea of the regulator is to prevent a situation where the availability of an apartment is provided only by a temporarily low payment, which the client will not be able to afford in the future. For buyers, this means that when choosing a mortgage, they will have to carefully evaluate not only the initial load, but also the entire payment schedule.
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