Three months before the 2024 Russian presidential election, the Kremlin is trying to secure popular support. This is why Vladimir Putin has expressed his wish to extend a popular mortgage program until the end of the year, to allow families to benefit from reduced rates.
Complicated news for the Russian central bank, which is trying as best it can to maintain the country’s financial stability by curbing demand and inflation. Faced with this, it recently doubled its key rate compared to June, currently standing at 16%.
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A 72% increase in mortgage volumes
This announcement from the Kremlin caused fury among the Russian population. Mortgage lending volumes have rocketed, with an increase of just 72% this year. This figure represents more than 63 billion euros, a real annual record for the country.
For Elvira Nabiullina, governor of the Central Bank of Russia, the consequences are worrying and will not allow rates to be lowered any time soon: “If the Government does not limit and target [les programmes de prêts hypothécaires subventionnés]…the effect of the policy rate on the economy will weaken considerably and, therefore, we may have to keep the rate high for longer”, she said, according to The Wall Street Journal.
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“It’s a huge risk”
As a result of easy financing in the real estate sector, the prices of newly built housing have soared. The price of a new home is much higher than the price of a resold home, which means that Russians who decided to invest in real estate would lose money if they resold.
The current repercussions of the Kremlin’s decision are, for the moment, positive on the surface for the Russian population, according to Alexandra Prokopenko, former head of the Russian central bank. “People feel richer. This is a very important political factor: people have visible signs that they are living better”, she explained.
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However, the consequences seem worrying in the long term for Alexandra Prokopenko, who adds: “These Government payments are not permanent. It’s a huge risk. It’s unclear how people will handle these loans in three or five years.”
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2023-12-22 07:37:34
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