Mortgage originations grow by 50% in August to RUB 260–270 bn

Mortgage originations grow by 50% in August to RUB 260–270 bn

Preliminary estimates from DOM.RF and Frank RG show continued growth of the mortgage market in August 2018 with RUB 260–270 bn worth of loans issued (up 1.5 times y-o-y).

In 8M 2018, 910,000–920,000 mortgage loans were issued for a total of RUB 1.8 tn. This represents a y-o-y increase of 1.5 times in volume terms and 1.65 times in value terms.

In July, the weighted average mortgage rate for newly constructed housing stood at 9.09%. This was due to the summer mortgage rate reduction by major market players to below 9% for a wide range of borrowers, and the increased number of joint projects with developers. The weighted average mortgage rate for secondary market properties was 9.75%. The weighted average rate for all mortgage loans issued in July stood at 9.57%.

Going forward, the mortgage rates will depend on the macroeconomic conditions and the movement in the Bank of Russia key interest rate. Reduced uncertainty related to the risk of sanctions could stabilise the securities and currency markets, easing inflationary pressures. The goal of lowering mortgage rates below 8% by 2024 remains on the agenda making the need to create a reliable long-term funding mechanism for the mortgage market even more pressing under the circumstances.

DOM.RF Research Centre estimates that by the end of 2018, mortgage originations will total RUB 3 tn, with the mortgage market expected to grow by 20–30%. Refinanced loans will account for 10–13% of all mortgage loans issued.

As at 1 August 2018, the banks’ overall mortgage portfolio exceeded RUB 6 tn, growing by 24% over the past 12 months, thanks to increased demand for mortgage loans as the key way of improving housing conditions. Mortgage portfolio quality remains high — the share of 90+ dpd mortgage loans went down to a record low 1.95%. In 7M 2018, the share of mortgage loans in the total retail loan portfolio stood at 44%, remaining at the year-end level of 2017.