Page 128 - RusRPTJun24

Overall, mortgage issuances grew modestly by 4%, reaching 466 billion rubles from 447 billion rubles in March.
Issuances under government support programs rose by 7% to 350 billion rubles from 326 billion rubles, maintaining their share at approximately 75% of the total volume. The most popular program remained the "Family Mortgage," with issuances amounting to 171 billion rubles, consistent with March's figures. Meanwhile, issuances under the "Preferential Mortgage" program increased by 15% to 110 billion rubles from 95 billion rubles, despite tighter conditions since December 23, 2023. This rise in demand is likely due to the approaching end of the program on July 1.
Market-rate mortgages saw a slight decline, falling to 116 billion rubles in April from 121 billion rubles in March, amid high interest rates on loans.
The CBR is also worried by booming unsecured retail borrowing and the
ever-expanding mortgage stock thanks to the generous state subsidy programme for would-be homeowners.
Despite the Bank of Russia’s drastic rate hikes and tighter macroprudential policies, the growth rate of unsecured consumer lending has remained high at 17% y/y as of 1 April 2024.
And a CBR robust rate hikes have not managed to curb the growth in borrowing, although it has slowed the rate of increase somewhat. In the first quarter 2024, the expansion of the unsecured consumer loan portfolio was driven by the credit card borrowing on which high interest rates have only a lagged effect, according to the CBR.
“The share of newly issued loans to individuals with debt service-to-income ratio of over 50% dropped to 34% in the first quarter 2024 compared to 63% in the fourth quarter 2022,” the CBR reports. “However, after the key rate hike and temporary lifting of restrictions on the effective interest rate (EIR) of consumer loans, banks have ramped up lending to borrowers with a high risk-profile embedding additional costs in the loan interest rate.”
The CBR is worried that the early indicators suggest the quality of the retail loan portfolio is starting to deteriorate.
The rapid expansion of mortgage lending in 2023 has also been driven by over-indebted borrowers, says the CBR.
“In the fourth quarter 2023, the share of mortgage loans issued to borrowers with high debt burden (debt service-to-income ratio above 80%) increased to 45% of newly issued loans, up 15 pp in two years.
credit card: This significant growth may be linked to increased household incomes, which have sustained high consumer activity. The primary driver of this growth is the credit card segment, where interest rates have traditionally been higher and thus less sensitive to changes in market rates. Additionally, with high deposit rates, consumers may find it advantageous to make purchases using the interest-free grace period offered by credit cards, thereby preserving their savings.
128 RUSSIA Country Report June 2024 www.intellinews.com