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Banks Scramble for Clients as Mortgage Lending Takes Off

Published: February 18, 2014 (Issue # 1797)



  • More mortgages than ever are being granted as banks lower their interest rates and begin lending more freely.
    Photo: V. Volkov / Vedomosti

More mortgages than ever are being granted as banks lower their interest rates and begin lending more freely.

Mortgage lending is soaring as banks lower their rates, carrying with it both the benefits and potential drawbacks of a mortgage-greedy banking system.

Until recently, Russian banks and consumers alike were skeptical of mortgages, and the rapidly escalating price of real estate did not help matters.

Now, stable housing prices and cultural acceptance of mortgages have opened up a new and dynamically growing market that banks are eager to capitalize on.

Related:

Bringing the Money Back to Russia

The country's dominant mortgage lender, state-run giant Sberbank, issued 55 percent more mortgages in January this year than in the same month in 2013, and is keen to keep the momentum, the bank's director of retail loans, Natalya Alymova, told Vedomosti.

"The January lending was the result of our work at the end of last year. To maintain the pace of growth throughout this year, we have decided to lower rates," Alymova said.

Last week, Sberbank shaved 0.5 percentage points off all of its basic mortgages, knocking them down to between 12.5 and 13.5 percent for a standard 10-year mortgage with a 50-percent down payment.

The average rate in 2013 was 12.4 percent, according to the Central Bank.

Fellow state-run bank VTB 24 also saw mortgage lending growth of more than 50 percent, while the market as a whole rose by about 30 percent, said Andrei Stepanenko, deputy chairman of the board of Raiffeisenbank.

The volume of mortgages has skyrocketed over the past three years, from 524,000 in 2011 to 692,000 in 2012 to 825,000 last year, according to the Central Bank. In 2004 it was 14,000, deputy vice president Igor Shuvalov said at a recent government meeting.

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