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Russian government to subsidise mortgages

The Russian prime minister Dimitri Medvedev has agreed on new measures that would boost the housebuilding industry in the country. In a meeting on Monday (February 2nd), Mr Medvedev apparently confirmed a 20 billion rouble investment into subsidising Russian mortgages, according to Russian newspaper Vedomosti.

The aim of this huge investment will be to reduce mortgage rates overall, which would spur more people on to buy homes. If Russia's government can afford this, then it would be a huge boost to its build and interiors sector. However, nothing has been officially announced, leading some to doubt whether or not the measures will come into effect.

 

What has been proposed?

According to Vedomosti, 20 billion roubles will be used to subsidise mortgage rates in Russia. This will will reduce said rates to 13 per cent, from the 17-20 per cent they currently stand at. The government will also compensate the banks involved, to the tune of between five and six per cent.

Russia has already introduced similar measures for car loans, so it is thought that the money will be used in a very similar way in this instance. One unnamed source indicated the mortgage subsidies would go through Russia's Agency for Mortgage Insurance (HMLA), although the organisation has declined to comment on the issue.

One of the most interesting aspects of the new measures is the fact that the mortgage subsidies would only apply to the purchase of apartments in new buildings or in newly built housing. This would provide a further boost to the Russian construction industry, as it would increase demand for new residential buildings.

 

Is this likely to be accurate?

Without a concrete announcement from the Russian government, it is impossible to be sure if these measures will in fact come into place, or if they are just speculation. However, it certainly seems as if Mr Medvedev agrees with the idea and is willing to put 20 billion roubles of government money towards mortgage subsidies.

After the meeting on February 2nd, Mr Medvedev's Facebook page displayed the following statement: "A mortgage is the most important financial instrument. It has helped to solve the housing problems of huge number of Russian families, while spurring the pace of housing construction."

This certainly seems to indicate the prime minister's support for investment in Russian mortgages. There is also the fact that some predict Russian mortgage lending will fall by a huge amount in 2015 - from 1.7 trillion roubles to 200 billion roubles - if action isn't taken. These all make it likely the government will take action and invest the 20 billion roubles.

 

What will the effects be?

Russia is in the middle of a few economic worries at the moment, and a boost to its housing sector would be very welcome. If mortgage lending rates were to fall, there would be lessened demand for housing as fewer people look to buy new homes.

The mortgage subsidies, on the other hand, would not only prevent this decline, but could even reverse it. The focus on new builds would provide an incentive for Russian buyers to look for recently constructed homes, spurring housebuilders on to create more properties.
For those with a higher income, the mortgage subsidies would give them the extra financial breathing room needed to pay more attention to their interior design. This means another industry will see a rise in demand, with all the positive economic effects that entails.


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Tanya Aleksankina

International Sales Manager - Interiors sectors

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