Sberbank has reduced rates on mortgages

As the message of the credit institution, rates are reduced under new year promotion by December 1. Products “the Purchase of finished housing” and “Acquisition of housing under construction” rates are reduced by 0.5 p. p. (the new range is up to 11.5–13% in rubles). The share of Sberbank will be valid until 31 January 2017.

For some regions (Moscow, Moscow suburbs, St.-Petersburg, Leningrad, Rostov and Kaliningrad oblast, and so on) rate will be reduced by 1 percentage point In these regions, the application for the loan can be submitted until 28 February 2017.

Sberbank reduces mortgage rates for the third time since the beginning of the year. The first decline occurred in mid-July, for the first time since the summer of 2015 (by 0.5 percentage points for basic products mortgage lending), then in mid-October (the same across the product line). In early November, the Bank extended the term of the loans on the mortgage with state support.

Sberbank has begun to reduce rates after the Bank of Russia for the first time since the summer of last year lowered its key interest rate, explaining his decision to stabilization of inflation, weakening inflation expectations and risks and the prospect of economic recovery. Prior to this, the head of Sberbank German Gref said that Sberbank is ready to reduce mortgage rates following the reduction of the key rate.

Competitors are not far behind

According to the Agency for housing mortgage lending (AHML), in October—November, mortgage rates declined on average by 0.3–0.6 percentage points (depending on type of loan). As stated in the study Agency, for the period of 15 market participants, issued in January—September most mortgages (according to Frank Research Group), ten one way or the other reduced rates. In October, this was done in addition to Sberbank, Promsvyazbank, the seller, Bank Vozrozhdenie and VTB24. In November and “DeltaCredit”, Bank “Saint Petersburg”, Gazprombank, Rosselkhozbank, “Russian capital”, SMP Bank, Svyaz-Bank, “URALSIB” Bank “AK BARS”, Bank “Russia” and many smaller banks.

In most cases banks cut rates by 0.5 percentage points, rarely — 1 AP (for example, “URALSIB” — to all clients, buying real estate at key Bank partners) or 0.25 percentage points, the Largest decline in mortgage interest recorded in the segment of the market programs the purchase of housing on the primary market, according to a survey.

“We monitor offers of competitors and respond quickly to key changes in the rates act ahead of the curve. We have recently reduced the rates on its mortgage programs, — said Deputy head of unit “Retail business” Bank “the Renaissance” Oleg Korkin. — Now the lowest rate is 10.9%, not including possible additional reduction in rates within the framework of our partnership programs with developers.”

Will it become cheaper

According to the seller, due to launched in spring of last year the state program of support of mortgage to take out a loan for the purchase of housing in a newly built house or a new building is now more profitable than on the secondary market. By Agency estimations, the weighted average rate in the primary market with government support by the end of November reached 11.41%. The secondary market rate depending on the initial payment ranged from 12,39 to 12.99%. While rates on mortgages without government in the primary market was on average 13 and 35% per annum, specifies the seller.

The state program of support of mortgage will cease to operate from next year. How to behave in rates in 2017, depends, in part, from the decision of the authorities on the extension program and from the decision of the Bank of Russia’s key rate, say the interviewed participants of the banking sector.

The state program of support of mortgage contributes to lower rates and maintain the industry as a whole: in 2015, more than 60% of all mortgage loans had mortgage under this program, in 2016 the share of such loans is still at the same level, said Deputy Chairman of Rosgosstrakh Bank Asker Enikeev. In his opinion, “[developer] market is not yet ready to move yourself: the situation in Gaza is extremely difficult, and it is connected first of all with the economic situation in the country.”

The prospects of effective recovery of real estate market in 2017 rather vague, says Enikeev. “As practice has shown, price dumping developers do not provide a sufficient demand from consumers, and more and more apartments remain unsold upon completion of construction. So, if there are not more than 10% of apartments, but now this figure can reach 40% depending on the specific object. Add that to lower apartment prices have nowhere to go, as the cost per square meter in the last two years has increased significantly. In this regard, the developers are the so-called scissors,” he explains. According to Enikeeva, to maintain the industry as a whole could help mitigate regulation of the Central Bank of the reserves while lending by banks to developers.

Enikeev believes that at this stage the program of subsidizing of rates should be roll over — “now is not the time for the lack of support for the industry.” In his opinion, the program needs to connect the secondary housing. “In the secondary market are now minimal movement, and because many buyers of apartments in new buildings to invest the money received from the sale of available apartments. Perhaps the program could be modified as part of the technology of its implementation,” he says. But the lack of state support is now definitely going to increase rates until the rate cut of the Central Bank.

UniCredit Bank also does not exclude that, if the program will not be renewed or will be renewed only for individual borrowers, rates in the primary market will have a tendency to increase. “How much they will grow is difficult to predict. To curb the growth rates will be influenced by the likelihood of reduction of the key rate in 2017, and the acceleration of growth of inflationary expectations of the population and the total abolition of the state program”, — said the representative of the Bank.

In his opinion, if the Central Bank will lower the key rate in the first quarter, it will lead to lower interest rates on mortgages, especially on the secondary market. If the same rate of the Central Bank in the first quarter will remain at 10%, the rate in the primary market with a high probability will grow, and in the secondary market will remain at current levels. “Much depends on actions of other banks in anticipation of new year promotions and discounts,” said a representative of UniCredit Bank.

However, there is much more optimistic forecasts. As suggested by Oleg Korkin of “Revival” after completion of the program of state support of mortgage rates on mortgages in the first half of the year will average 12-13%, and in the second half will continue to decline. “We believe that the result of the reduction in rates next year will be the continued growth in the volume of mortgage loans. It is not excluded that we will see new records,” he added.

The head of the Department of lending and insurance products Absolut Bank Anton Pavlov believes that a further decline in mortgage rates can be expected no earlier than April 2017 and the key for correction in rates will be the decision of the Central Bank’s key rate. “If the Central Bank does not change in the first quarter, the key rate, banks will maintain the current level of mortgage rates,” he says.

According to estimates Absolut Bank, in 2017 the mortgage market will continue to grow. “The demand for housing credit programs will continue. In large part because banks and developers, who worked closely during the action of the state program, will continue to offer partnership programs at rates lower than under the standard conditions of the state program”, — he said.

In August, the head of Sberbank German Gref at a meeting with President Vladimir Putin suggested that in 2017, rates may fall below 11%. At the same time, he advised potential borrowers not to wait for this moment, as the decline of interest on the loan, in his opinion, will be accompanied by the growth of housing prices — these processes are approximately synchronized.