Page 90 - RusRPTSept21

prolongation into question.
In June the President Vladimir Putin announced that the programme will be prolonged by one more year, but will see a 50 basis points minimum interest rate increase to 7%. The mortgage limits are cut from RUB12mn in the Moscow and St Petersburg metropolitan areas, and RUB6mn in other regions, to RUB3mn for all areas.
As a result, the issuance of discounted mortgages declined by 73% month-on-month to RUB57bn, according to Frank RG. The total share of mortgages in retail loans declined by 5 percentage points, while lower mortgage issuance has brought retail loans down by 9.5% y/y to RUB1.2 trillion. Still, retail loans were up 20.5% on year on year terms in July.
Analysts surveyed by Vedomosti believe that issuance of mortgages has peaked, and is likely to remain at the level of July, as it was the first month of adaptation to the new issuance rules. Recent hikes in the key interest rates feeding through mortgage rates also had an adverse effect on issuance through higher mortgage rates.
At the same time, some upside is still possible, as the new rules shift the focus of discounted loans from big cities to regions and big families, which could expand the number of potential borrowers and eventually lead to an upside in mortgage issuance.
The Russian government has prolonged the subsidised family mortgage programme by one year, to YE23, while it has doubled the amount of total origination to RUB1.7tn.
In 1H21, the total value of mortgages reached RUB2.7tn (+75% y/y), with subsidised mortgages on the primary market still being the main driver. The total origination of the programme has been RUB1.7tn since its inception on 17 April 2020, which has accounted for 27% of the total mortgages issued for the same period and close to 80% for the primary market. It became the key support initiative for the pandemic-related turbulence in the real estate sector.
We anticipate sector cooling in the short-term, due to the modification of the subsidised mortgage programme. Its rate is to grow from 50bp from 1 July (to 7%) and mortgage limits are to be lower, at RUB3mn for all regions (vs. the RUB12mn for Moscow and St Petersburg, and RUB6mn for other geographies before). Partially offsetting this, the family mortgage programme (with a 6% rate and a limit of RUB12mn for the capital and RUB6mn for the regions) is to lower its
90 RUSSIA Country Report September 2021 www.intellinews.com