12% mortgage loans: good but too much

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12% mortgage loans: good but too much
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We have already written about the government’s special subsidies program for housing purchasing on the primary market at a fixed rate of 13%. However, the Central Bank has recently decreased the key rate from 15% to 14%, so the preferential rate has had to be reconsidered.

On March 17th, at the Government Commission proceedings, the Ministry of Construction together with the Russian Union of Industrialists and Entrepreneurs (RUIE) suggested decreasing the rate of the subsidies program from 13% to 12% by introducing a number of alterations to the Government Resolution dated March 13th. And, following the Minister of Construction, Mikhail Menn, this initiative was supported by the Government.
State Secretary Albert Plutnik, Deputy Minister of Construction, clarified later that, “the 12% established rate for the mortgage loans that will be granted before March 1st 2016 will remain in place during the whole loan period” . The Deputy Director General of the HMLA (Housing Mortgage Lending Agency), Andrei Semenyuk, remarked that, “The volume of a mortgage loan by a bank-participant is defined as 300 mln roubles. The banks, when the volume of a mortgage loan is less than the designated sum, can ask the HMLA for help.”
A number of financial enterprises will grant mortgage loans at 12%. As “RBC- Realty” reports, Sberbank offered the 12% rate before the Government Resolution was adopted, and the VTB-group did so after the adoption. Our magazine was informed of the Bank of Moscow’s having started to receive applications for 12% mortgage loans in the framework of the Government’s special subsidies program, and it is planning to grant 20 bln roubles in mortgage loans. As their press service reported, Reiffeisen Bank, Absolut Bank, Svyaz Bank, and “DeltaCredit” bank have announced their commitment to take part in the program, but they have not yet defined specific parameters. However, “UralSyb” and Nordea Banks will not participate in the program, said their official representatives.
Having effected the rate decrease from 13% to 12% without altering the parameters of the special program, the Ministry of Construction is optimistic. “In March the situation will change for the better”, Mikhail Menn assured us. A number of experts agree with the minister. “The rapid decrease of rates will help the situation; at least it will reduce the fall in sales and will prevent or minimize the price decrease”, Yulia Gordeeva, the Senior Analyst from Sberbank Investment Research, CFA, thinks. “In the current market, with the existing Central Bank key rate, the loans granted in the framework of the government program will be more competitive and will help to revive the mortgage market,” Alexander Engel, GC MMC (Moscow Mortgage Center), Head of New Housing Development Department, asserted.
As for us, 12% is, of course, better than 13%, but it is still a lot. Many top managers in the construction business agree with us. “The whole world has worked with mortgages for years,” the President of “Stroimash- Vibropress” holding and Vice-President of the Russian Constructors’ Union, Sergei Kuchikhin, said in an interview to Construction.ru. “But the mortgage loans we have today are nonsense: even 13% a year is unreal. All over the world the mortgage loans percentage is 3-6% or even lower. If we have such rates, everything will be all right.”
Government authorities have already warned that if the Russia Central Bank key rate decreases to 9.5%, the subsidies submission is to be ceased.
And you say: a mortgage loan, at a low rate… I suppose we are safe with it…

Andrei Chernakov