The Russian government, on behalf of Vladimir Putin, has reduced the rate on preferential mortgages from 9 to 7% per annum. The initiative should help many citizens improve their living conditions and at the same time support the construction industry, the country’s leadership is sure. Back in the spring, against the backdrop of a sharp increase in bank rates, the issuance of mortgages in the country fell by almost four times compared to last year. Thus, the easing of the conditions of the preferential program is designed to revive demand in the housing lending market, experts explain. How real estate prices can change under these conditions – in the material RT.

The Russian government has reduced the rate on preferential mortgages from 9 to 7% per annum. The corresponding decree on Wednesday, June 22, was signed by Prime Minister Mikhail Mishustin.

“This measure will not only help more people buy housing on favorable terms, but will also provide significant support to the construction sector, load capacities and related industries,” Mishustin said at a Cabinet meeting.

As the prime minister noted, the duration of the program and its parameters remained the same. Until the end of 2022, all Russians can take out a mortgage at a reduced rate when buying apartments in new buildings worth up to 12 million rubles in the Moscow and St. Petersburg agglomerations, as well as up to 6 million rubles in other regions of the country.

In addition, as part of the initiative, citizens can take loans in the amount of up to 30 million and 15 million rubles, respectively. However, in this case, the subsidized rate still applies only to amounts up to 12 million and 6 million rubles – the rest must be paid on market terms.

To reduce the rate on preferential mortgages to 7% per annum, President Vladimir Putin earlier proposed during a speech at the St. Petersburg International Economic Forum. As the Russian leader emphasized, the main goal of such a step is to help Russians in solving housing problems.

“After a sharp rise in the spring, interest rates in the Russian economy are gradually declining, the Central Bank lowers the key rate. In this regard, I consider it possible to once again lower the rate on preferential mortgages, ”Putin explained.

Recall that at the beginning of 2022, with the key rate of the Central Bank of 9.5% per annum, Russians could get a preferential mortgage at 7%. At that moment, the maximum loan amount was the same for all regions of the country and amounted to 3 million rubles.

At the end of February, against the backdrop of Western sanctions against Moscow, the Central Bank raised the key rate immediately to 20% per annum to curb inflation. As a result, Russian banks began to massively increase interest on housing loans, and in mid-March, the national average reached 23-24% per annum. Under these conditions, the government decided to raise the rate on preferential mortgages to 12% per annum and at the same time increase the maximum loan amount.

As the situation in the economy stabilized from April, the Central Bank began to gradually reduce the key rate and already in June returned it to the pre-sanction 9.5% per annum. In parallel, the authorities began to lower the rate on preferential mortgages.

credit revival

Softening the conditions of the preferential program will help revive the housing lending market in Russia after the spring collapse. This opinion was shared with RT by the first vice-president of the all-Russian public organization of small and medium-sized businesses “Support of Russia” Pavel Sigal.

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According to the latest data from the Central Bank, in April 2022, the issuance of mortgages in the country fell by almost four times compared to the same period in 2021. So, for a month, the Russians issued only 49.4 thousand loans, while a year ago the corresponding value was 191.4 thousand.

Although there was a high demand in the real estate market at the beginning of spring, a sharp increase in interest rates and rising inflation seriously cooled the interest of Russians in buying real estate, Pavel Sigal noted. Moreover, according to him, in summer the demand for mortgages traditionally remains low due to seasonal factors.

“Nevertheless, the rate cut has already caused a revival in both real estate and the entire construction industry. Combined with various government benefits and special conditions, the initiative will undoubtedly play an important role in boosting demand dynamics. Peak values ​​of consumer interest are expected no earlier than the onset of autumn, but market players are preparing for this in advance, evaluating the most relevant areas and conducting surveys among potential buyers,” the specialist noted.

At the same time, experts interviewed by RT do not yet expect demand for housing loans in Russia to return to pre-sanction levels. Against the backdrop of the decline in real disposable incomes of the population, many Russians today are basically not ready to take out a mortgage, says Gleb Finkelshtein, a specialist in the Strategic Research Department at Total Research.

In his opinion, in the current environment, developers will try to attract new customers, but will no longer be able to raise prices at the same pace as in the past two years. The cost of finished housing at the same time may decrease, the expert did not rule out.

“Secondary real estate will continue to gradually sink in price, since rates there will remain 2-3 percentage points higher than for new buildings. In addition, there are now significantly fewer buyers than six months ago, and sellers are not getting much smaller, ”the analyst explained.

The Equifax credit bureau does not expect a rise in the cost of secondary housing either. According to the experts of the organization, in the near future it will be possible to observe multidirectional trends in the market.

“Secondary housing may remain in the same price ranges, as demand for it will decrease due to the launch of new construction volumes on the market. At the same time, new buildings will almost traditionally continue to grow, ”the company told RT.

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J. A. Allen

Author, blogger, freelance writer. Hater of spiders. Drinker of wine. Mother of hellions.

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