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Eastern Europe
March 8, 2019 www.intellinews.com I Page 14
Mortgages have exploded in Russia but now Putin wants the rate under 8%
Ben Aris in Berlin
Mortgages have exploded in Russia and the vol- ume of housing loans has been doubling every two years for a decade. The government is keen to get people into their own homes and just launched a raft of new initiatives to make mortgages cheaper and more attractive than ever.
The total stock of mortgage debt topped RUB6 tril- lion in last quarter of 2018 and reached a total of RUB6.4 trillion ($97.4bn) as of the start of January. The stock has been growing steadily yet the share of mortgage debt as a percentage of GDP in Russia remains well below the levels in western Europe.
Over the last few years the government subsidised mortgage rates over 12% to encourage people to borrow. However, the solid management of the Central Bank of Russia (CBR) has seen both the cost of borrowing and inflation come down so that mortgages fell below 10% for the first time ever in 2018. Now President Vladimir Putin said in Febru- ary he wants to see interest rates under 8% soon.
That will be made more difficult by the impending new US sanctions and Russia’s dependency on oil prices and the success of the harvest: after cutting rates continuously since the ruble’s crash at the end of 2014, the CBR ended its easing cycle and hiked rates twice at the end of last year in anticipation of more ruble volatility this year and as inflation started to creep up. The blended rate mortgage rate hit a record low of 9.4% in October 2018, but then ticked up to 10% in January 2019. Economists think that as inflation is supposed to ease in the second half of this year the CBR could go back to cutting rates again.
In the meantime the Kremlin has been dreaming up ways to make it easier to buy an apartment as part of Putin’s extensive package of social gifts he announced during his state of the nation speech in February that was designed to nip in the bud the growing social disgruntlement of the Russian citizens.
Among the measures is the 8% target rate (although this time round the government won’t subsidise mortgage rates again.) The state will also reduce property taxes on families with