Mortgage loan games: stakes go up?

20/ 07

Most of the real estate market analysts forecast a decrease in mortgage loan interest rates, however Rustam Azizov, head of the RDI Mortgage loan center believes that interest rates are not going to go down, since bank’s funding rate is at the level of 10-10.5% whereas the current rate of return does not exceed 1.5%.

“The amounts reserved by banks for contingent losses will not guarantee a decrease in the interest rates as a whole. And insurance against the risks of receiving less funds from the borrowers’ debt than is due will not let the rates go down”, believes Rustam.
Experience has proven that after the leading banks increase the rate, rates of smaller banks go up as well, and as a rule they will be 0.25 – 0.5% higher. But sometimes the leading banks increase the rate while smaller banks start pushing it down to attract new clients.

“With the current situation in the market making any forecasts is difficult. It is connected with economic and political situation, introduction of another package of sanctions and lots of other factors”, continues R. Azizov.

- However I personally believe that the average market rate will remain at 12-12.5% until the end of the year (NB: According to information of the Mortgage Loan Agency, early in the spring the average weighted rate for mortgage loans in rubles comprised 12.3%).

The share of mortgage loans issued for new residential property will stand at 50-55% of the total number of transactions. However in case interest rates become less favorable in the leading banks and better in smaller banks, mortgage loan leaders may lose their main share in this market segment.

In June the share of mortgage loans for RDI projects amounted almost to 60%. “This proves that clients continue to actively utilize mortgage loans, investing their savings in real estate using mortgage instruments”, says head of the RDI Mortgage loan center.

Besides, market analysts have noted a sharp increase in customers’ activity in Q1 2014, mainly due to the growing distressing expectations in the society caused by ruble depreciation and the news flow on bank failures. “But I think the main factor leading to a growth in the number of concluded transactions by dozens of percentage points as compared to January – March 2013 was a decrease in mortgage loan interest rates and the distressing expectations in the market”, claims Azizov.