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- How does the Central Bank do this: starting in July, it will become almost impossible to get a mortgage with a contribution below 20%
How does the Central Bank do this: starting in July, it will become almost impossible to get a mortgage with a contribution below 20%
Starting from July 1 of this year, it will be almost impossible for borrowers with a low down payment (20% or less) to take out a mortgage. Also, a loan for the purchase of housing is highly likely to be refused to over-indebted Russians, who spend 80% or more of their income on paying off debts. Starting from July 1, the Central Bank intends to introduce direct quantitative restrictions on mortgages for the most risky borrowers, the regulator's press service told Izvestia. Experts consider this step logical, since after the cancellation of the massive preferential mortgage program in the middle of last year, banks and developers are using tricks to ensure that people with low down payments can purchase housing on credit.
Starting from July 1, it will be more difficult to get a loan to buy a home
The Central Bank received the legislative right to set macroprudential limits (MPL) or quantitative restrictions on mortgages starting from April 1 of this year last year. And already in 2025, he intends to take advantage of this opportunity, follows from the response of the Central Bank's press service to a request from Izvestia.
"We plan that the MPL will first be established for the most risky mortgage loans issued from July 1, 2025," the Central Bank told Izvestia.
They clarified that at the first stage, quantitative restrictions will affect the most risky borrowers, who spend more than 80% of their income on debt servicing and have a low down payment (no more than 20%). However, at the moment the Central Bank has not disclosed what specific limits will be set.
—The MPL values will be determined based on the situation in the economy and, in particular, in the mortgage market and among developers," the regulator's press service said.
Perhaps the Central Bank will follow the same path that it chose in the application of MPL for unsecured consumer loans, where at first fairly mild restrictions were imposed, which the regulator subsequently significantly tightened. In this segment, he began to apply quantitative restrictions as early as 2023. Initially, they also affected the most risky clients with PD (debt burden indicator, the share of income spent on debt servicing). 80% or more. At first, banks set a limit of 25% of the portfolio for such borrowers. Later, restrictions also affected citizens who spend 50% or more of their income on servicing obligations. Then the limits extended to other categories of borrowers — from 50%. At the moment, the limits have been significantly reduced. And, for example, only 3% of unsecured consumer loans may be issued to people with a personal income of 80%+. And they can't count on credit cards at all.
However, the risks to the financial system in terms of mortgages are significantly lower than for consumer loans. Firstly, there is a deposit. Secondly, there is a consistently low level of delinquency on these loans. In addition, for risky mortgage borrowers, the regulator has established actually prohibitive risk factor allowances (what proportion of loans banks should issue from their own funds, rather than attracted to deposits). And due to this, it was possible to reduce the level of loans to the most risky borrowers to 13%.
The Central Bank intends to limit the issuance of mortgages to "bad" borrowers
The decision to establish an MPL for mortgages in general looks logical now, says Gennady Fofanov, president of the Invoicafe investment platform.
— Probably, the main reason for this step is the desire of the Central Bank to further tighten control over lending in the real estate sector, especially in relation to borrowers with high creditworthiness or low down payment, — he explained.
And Ivan Uklein, Senior Director for Bank Ratings at Expert RA, sees no contradiction in using two debt management mechanisms at once. According to him, surcharges, unlike direct quantitative restrictions, are a tool for more fine-tuning. And the MPL, he believes, was needed in order to quickly eliminate the imbalances in retail lending.
— In addition, high market rates and housing prices force developers and banks to resort to tricks, including applying for a mortgage with a low down payment. At the same time, the rate of increase in the key rate in 2023-2024 significantly outpaced the growth of real incomes of the population, as a result of which the median debt burden (PD) showed an increasing trend," Ivan Uklein noted.
According to Gennady Fofanov, quantitative restrictions directly affect the volume and structure of loans issued, which allows for more effective risk management at the level of the entire financial system. At the same time, according to the expert, the introduction of such limits for borrowers with a high workload is likely to lead to a further decrease in mortgage lending.
— However, this can have two consequences. On the one hand, such measures are aimed at preventing the accumulation of excessive debts among the population and reducing the risks of defaults, which ultimately will contribute to financial stability. On the other hand, it may limit access to mortgage loans for certain categories of citizens, especially those who are just starting their credit history, for example, for young people," said Gennady Fofanov.
And this, he added, will have a slowing effect on the growth of the real estate market and related sectors of the economy.
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