Page 156 - RusRPTAug24

by nearly 10%, a one-third increase compared to the same period in 2023 when interest rates were lower.
This growth is attributed to sustained high consumer activity, with household spending continuing to rise in June, albeit at a slightly slower pace compared to May. The increase in income levels has supported this trend. A significant portion of the loan issuances was in the credit card segment, where interest rates have historically been high and thus less sensitive to increases in the key interest rate. Additionally, the high returns on deposits have encouraged borrowers to make use of interest-free grace periods.
To cool consumer lending and shift loan issuance towards less risky borrower categories, the Bank of Russia raised macroprudential add-ons for consumer loans effective July 1, 2024, with another increase scheduled for September 1, 2024. The central bank also set stricter loan-to-value limits for the third quarter of 2024. Furthermore, the moratorium on limiting the total cost of credit, which had been in place, expired on July 1, 2024.
As of July 1, 2024 Russia’s discounted mortgage support programme, in effect since 2020, expires, but with a number of targeted sub-programmes such as family, Far East or IT specialists mortgages to continue. As followed by bne IntelliNews, the Russian government and the Central Bank of Russia (CBR) moved to toughen the requirements for state discounted mortgage programmes, as expected, in order to cool down the mortgage market. The CBR and the analysts have warned that a bubble is forming in the Russian real estate market, thanks to over-generous subsidised mortgages. In four years since its adoption, more than 1.5mn loans worth over RUB6 trillion ($68bn) have been issued under the discounted mortgage programme. The programme has quickly inflated the Russian property market, jumping from 24% of all mortgages issued in 2020 to 48% in 2024. The programme has introduced a number of structural imbalances on the property market, such a price gap between primary and secondary housing (44% on average by February 2024), supply focus on smaller apartments and favouring large developers with easier access to financial instruments such as escrow accounts. However, there have been spillover effects into SMEs segments, such as companies providing services for repair and finishing of flats, furniture manufacturers, interior designers, manufacturers of building materials and others.
The yawning gap between the official rate and mortgage rate created “excessive arbitrage for the new-build market” and drove record sales. The total value of mortgages held in Russia grew 34.5 per cent last year. Though that programme was phased out on July 1, following repeated pleas from the central bank, the effects have been lasting. “The financial departments of the largest developers can now be compared to investment banks,” says Skatov. “Developers can sell nothing for a whole year and still remain profitable and
156 RUSSIA Country Report August 2024 www.intellinews.com