Page 96 - RusRPTJun21

The Central Bank of Russia (CBR) First Deputy Governor Ksenia Yudaeva said on May 17 that the debt burden of Russian households has reached a historic high, potentially entering bubble territory.
The latest data show that in March, Russians took out a record RUB340bn ($4.6bn) in consumer loans, as the consumer increasingly turns to credit to fund their life style in the face of gradually eroding incomes. Real incomes have fallen every year in the last eight years and have now fallen to the levels last seen in the 2010s, reports the Bank of Finland Institute for Economies in Transition (BOFIT).
Yudaeva said that whereas last year the CBR was most concerned about financial stability during the pandemic, its top concern is becoming the population’s indebtedness. As a result, the CBR plans to increase risk coefficients on consumer loans, which were lowered during the pandemic, starting on July 1. The premiums will be calculated using the debt-to-income indicator introduced in October 2019.
This is not the first time that policymakers have feared that the unsecured consumer credit market is getting out of hand. Debates about household debt dominated macro discussions before COVID-19 hit. Then-Economy Minister Maxim Oreshkin blamed the central bank for allowing consumer credit to get out of control, which he claimed was crowding out corporate investment. CBR Governor Elvira Nabiullina shot back that there was no bubble and “it’s a big exaggeration to blame consumer credit for all the problems in the economy.”
Separately, the CBR is also worried about a bubble forming in the housing loan market where mortgage borrowing has been supercharged by a government scheme to subsidies mortgages and bring the rates down to 6.5%. The scheme has been a smash hit with the population and both the banks and real estate sector have been big winners, cushioning the pain from last year’s recession somewhat.
However, the widespread availability of cheap mortgages has lead to price rises in some regions and speculation. Reportedly, the Central Bank of Russia (CBR) is alarmed over the growing property price bubble, and could block the prolongation of financing cheap mortgage scheme which is due to expire in July, unless the programme is modified.
As followed by bne IntelliNews, CBR Governor Elvira Nabiullina first urged rolling back mortgage subsidies in a "timely manner" in November 2020, warning that it risks creating bubbles of poorly secured mortgages.
Nabiullina also pointed to a rise in prices on the primary housing market, which is abnormal for current crisis conditions and cancels out the consumer surplus from lower mortgage rates.
The subsidised 6.5% rate mortgage programme was introduced in
96 RUSSIA Country Report June 2021 www.intellinews.com