Add it up, please: banks will be banned from overstating mortgage rates by up to 100%

The Central Bank has agreed with the banks that they will stop excessively inflating the rates on the mortgage, when part of the loan is taken at a preferential interest rate, and the remaining amount is at a market rate (up to 100%). Mikhail Mamuta, head of the regulator's consumer protection service, told Izvestia about this. Izvestia was the first to draw attention to this problem in December, and it will be resolved on April 1. From this date, the total cost of the loan will not be able to exceed the average market values by more than a third, while a moratorium on this rule is in effect. And the Central Bank does not see the need to extend it, Mikhail Mamuta concluded. Whether mortgages will finally become more affordable is in the Izvestia article.

When will banks stop raising mortgage rates

Banks will stop excessively inflating rates on combined mortgages, Izvestia found out. At the end of last year, the practice spread when they artificially slowed down the issuance of housing loans. For example, they issued an additional part of the loan to a preferential program under market conditions at extremely inflated rates — up to 100%, Deputy Finance Minister Ivan Chebeskov told Izvestia. The Ministry of Finance and the Central Bank opposed such unfair practices.

Photo: IZVESTIA/Dmitry Korotaev

In general, a combined mortgage is a legitimate thing, but a person should understand how much he pays on the market side, said Mikhail Mamuta, head of the consumer protection service of the regulator. He stressed that it is important that this information is not hidden.

In addition, the Central Bank has agreed with banks that they will stop excessively inflating rates on such programs. They should not exceed the level set by the regulator for average market values for mortgages, Mikhail Mamuta added.

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In 2022, a law began to apply according to which the total cost of a mortgage loan cannot exceed the average market level by more than a third. The Central Bank calculates this figure for each quarter. The UCS includes not only interest on the loan, but also any other related payments, such as insurance and other additional services.

There is now a moratorium on this rule — the Central Bank introduced it until March 31, 2025 due to a sharp increase in the key rate. So far, the Central Bank does not see the need to extend it, Mikhail Mamuta told Izvestia.

Photo: IZVESTIA/Pavel Volkov

This means that from April 1, banks that have greatly overestimated rates (by more than a third) will have to reduce the full cost of the loan, explained Vladimir Chernov, analyst at Freedom Finance Global. In his opinion, it is not worth extending the moratorium, because this rule is designed to limit the rates on combined mortgages and make them more equitable.

What is the maximum mortgage rate that a bank can set?

A combined mortgage assumes that part of the loan is issued at a discounted rate under a government program, and the remaining amount is at a market rate. Borrowers use such a tool when the cost of the purchased housing exceeds the maximum amount stipulated by the preferential program.

This is often a necessity, and the market part may account for a fairly large amount. So, the average price of an apartment in the Russian capital now stands at about 20 million rubles, said Evgeny Shavnev, CEO of Flip LLC, an investment company in the real estate market. At the same time, the maximum loan amount for a family mortgage is only 12 million rubles for Moscow and St. Petersburg, and for other regions — 6 million.

Currently, the average full cost of housing loans for the top 10 banks is about 29-30%. This means that in the absence of a moratorium, banks would have to offer rates of no more than 40%. Now, if a person borrows 12 million on a preferential mortgage and another 12 million on a market mortgage, and the bank overstates the rate on the second part to 100%, then the average rate is already 53%. This exceeds the permissible level, which means that after the end of the moratorium it will become a violation, explained Evgeny Shavnev.

Photo: IZVESTIA/Eduard Kornienko

Banks will have to cut rates. And this will make loans more affordable for borrowers, said Maxim Kolyadov, Head of work with Individuals at Insurance Broker AMsec24. He explained that this will probably allow more people to take out mortgages, and this will help the development of the real estate market.

The overall rate level still remains high, but eliminating artificial margins from banks will help borrowers get more predictable and fair terms, agreed Valery Tumin, Director of Russian and CIS Markets at fam Properties. At the same time, it is important that the reduction in interest rates is not accompanied by a deterioration in other credit conditions, Maxim Kolyadov emphasized.

Izvestia asked the largest banks if they noticed an overestimation of rates on the market part of the pharmacy and what conditions they were offering. VTB noted that it had already lowered rates on such programs last week. Currently, rates for a family program loan in Moscow and St. Petersburg for 13.5 million rubles start at 12%, the press service of the credit institution said. This means that a person can take 12 million at 6%, and another 1.5 million at the market rate. And the average rate for the entire loan is 12%.

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Why are housing loans getting cheaper and how will this affect the real estate market?

When will banks stop offering mortgage cashback schemes and overpricing housing

From April 1, banks will also be required to comply with the mortgage standard, said Mikhail Mamuta, head of the regulator's consumer protection service. He noted that it was assumed that the first quarter of this year would be a period of adaptation. And then market participants will no longer be able to use high-risk schemes, including cashback (that is, to take into account in the initial payment the amount that is returned to the borrower after the purchase of housing). And also, for example, they will not be able to receive remuneration from the developer to reduce the rate, which leads to an overestimation of apartment prices.

Photo: IZVESTIA/Sergey Lantyukhov

Mortgages are a socially important product, Evgeny Shavnev from Flip emphasized. Therefore, there should be no unfair practices in it.

It also hardly makes sense to extend the moratorium on the rule that banks cannot set rates more than a third higher than the average market rate after March 31, says Valery Tumin. According to him, the relaxation was introduced as a temporary measure. If it is extended, it will be for a short period of time and only if there are drastic changes in the economy.

However, not everyone in the market agrees with this. Some propose to completely abandon this restriction, said Anna Gondusova, head of Product Development at Alfa Capital Management Company. The main rationale is that borrowers were overpaying anyway — either banks were overstating the cost of the loan, or developers were overstating housing prices. Therefore, if the Central Bank lifts the restriction on UCS, borrowers are likely to continue to borrow at higher rates. But on the other hand, the market will stop overestimating the value of real estate, the expert believes.