“On the whole we do not expect to see any major problems with mortgage repayments in 2016,” the Analytical Center's expert Natalia Safina told a Prime News Agency correspondent. The share of overdue mortgage payments in rubles, which makes up 96.7% of all mortgage debt in Russia, did not change in 2015 and still remains at 1%, which is just 0.1 percentage points more than it was earlier in the year, Ms. Safina stressed.
Russia will not face any major problems with mortgage repayments in 2016
“The rate of repayments on foreign currency mortgages will depend on what happens to the Russian ruble,” the expert said. In her opinion, oil prices in the global market are close to a minimum so there is a limit to the potential devaluation of the ruble. “Once the program to help people with foreign currency mortgages has been implemented, the situation in that segment should stabilize in the near future,” Ms. Safina noted.
The expert also pointed out that the program to help some categories of mortgage borrowers that the Russian government approved last year includes offering support to mortgage borrowers regardless of the currency they took their mortgage out in. Under the program, foreign currency mortgages are converted into rubles at the exchange rate set by the Bank of Russia for the date the mortgage restructuring agreement between the bank and the borrower went into effect. The interest rate on the mortgage once it has been converted into rubles cannot exceed 12% a year, Ms. Safina said.
In 2015, the Russian mortgage market was saved by a state program of subsidizing mortgage interest rates for new housing that was adopted last March and this factor is going to continue playing a positive role this year, Ms. Safina believes. “Unlike the other segments of retail lending where we have seen a significant decline in all key indicators (with the mortgage segment excluded, total loans fell by 13.3% in 2015 while the share of overdue debt went up from 8% to 11.8%), the mortgage market was able to bounce back pretty quickly after a collapse early in the year, with total mortgages growing by 11.1%,” the expert explained.
The share of mortgages with benefits issued in Russia under the program to support the mortgage market last year was 41.6% of the total amount of mortgages issued across the country, the expert noted. “The program of offering mortgages with extra benefits has proved an effective instrument for supporting the market. Extending it through the end of 2016 is a logical step in a situation where the banks continue to charge high interest even as the real disposable income of household declines and general economic uncertainty persists,” Ms. Safina argues.