Russia's mortgage sector could face imminent collapse, forecasters say.
Predicting a Slump in Russian Mortgage Lending by 2025
Get ready for some rough sledding in Russia's mortgage market by the end of 2025, as for the first time in eight years, the number of mortgages issued might hit a staggering low. This staggering prediction comes from the National Credit Ratings (NKR) rating agency, as reported by TASS.
The NKR is anticipating that only 0.8 to 1 million fresh mortgage loans will be doled out this year, which means a hefty 30-40% drop compared to 2024. To put this into some perspective, numbers like these haven't been seen since 2016-2017. However, researchers stress that even this sizeable figure will likely be covered by 80% by subsidized mortgage programs that offer interest rates lower than the average cost of loans over the past 8-9 years.
Furthermore, banks are projected to shell out mortgage loans worth 3.3 to 3.7 trillion rubles. Researchers also predict that influenced by a rise in the cost per square meter, the demand for housing will stay pretty much at the level of 2016-2017, where average rates lingered around 11-12%.
Sergei Gordiyko, an expert in the mortgage market, had previously opined that without subsidized lending programs, the mortgage market would "deflate." Currently, developers are only diving into cities where business is booming and housing is selling like hotcakes, according to Gordiyko.
Of course, this isn't the first time Russians have weighed in on mortgage rates. Previously, they voiced the interest rates at which they'd feel comfortable taking a mortgage.
As for the reasons behind this impending drop in mortgage lending, economic circumstances, mortgage terms, regulatory changes, and housing prices might be contributing factors. The Russian economy is currently sluggish, which could affect borrowing and lending activities. An increase in the average mortgage term to nearly 26 years is partly due to rising housing prices making longer terms necessary for affordability. Additionally, changes in financial regulations, such as the reintroduction of limits on the total cost of credit for consumer loans starting April 2025, could impact market dynamics. Rapidly increasing property prices may also deter some potential buyers from entering the market, lessening the demand for mortgages.
For more precise reasons behind the NKR's predictions, more in-depth information from NKR or related financial analyses would be needed. Keep your eyes peeled for more updates on this developing story.
- According to a prediction by the National Credit Ratings (NKR) rating agency, the number of mortgages issued in Russia might drop significantly, hitting a low not seen since 2016-2017, as early as 2025.
- In 2024, the number of mortgage loans issued is expected to be around 30-40% higher than the estimated 0.8 to 1 million fresh loans expected to be doled out in 2025.
- The finance and banking-and-insurance industry might see a drop in mortgage lending worth 3.3 to 3.7 trillion rubles in 2025, a possible result of economic circumstances, changes in mortgage terms, regulatory changes, and rising housing prices.
- In citing industry reports, the average mortgage rate is projected to hover around 11-12% in 2025, a level last seen in 2016-2017.
