For the first instance, mortgage restraints have been imposed by the Central Bank
The Bank of Russia has announced a series of measures to reduce lending risks and ensure financial stability in the housing market and consumer credit segments. The central bank has updated macroprudential limits on mortgages for individual housing construction (IHS) and consumer loans secured by real estate.
From September 1, the Bank of Russia has reduced macroprudential add-ons for loans to purchase apartments under construction. This move is aimed at cooling down the housing market and reducing the likelihood of defaults, which could pose systemic risks to the banking sector.
In addition, the operation of quantitative limits on mortgages for apartments in multi-apartment buildings has been extended to the fourth quarter. This measure is intended to maintain prudent lending discipline among banks and reduce the buildup of vulnerabilities in the housing market.
The Bank of Russia is also implementing macroeconomic limits on mortgages for IHS and consumer loans secured by real estate, effective from October 1 this year. These limits set caps on loan-to-value (LTV) ratios and debt-to-income ratios for new loans in these categories. The goal is to curb excessive household borrowing and prevent overheating in the housing market.
The Bank of Russia aims to reduce risk levels by setting limits below the average market values seen in the second quarter. By tightening credit standards, the central bank seeks to ensure borrowers have adequate financial capacity to repay loans without overindebtedness. The Bank of Russia believes that by setting clear quantitative bounds on mortgage lending for IHS and consumer loans secured by real estate, it can maintain prudent lending discipline among banks and reduce the buildup of vulnerabilities in the consumer credit market.
However, the exact updated numeric values of these macroprudential limits have not been detailed in the provided search results. These figures are typically published in official communications or regulatory circulars from the Bank of Russia.
It is worth noting that in the second quarter of this year, the share of IHS loans with a debt-to-income ratio above 80% was 30%. For consumer loans secured by real estate, the share was 46%. The share of loans with a debt-to-income ratio of 50 to 80% was 28% for both IHS and consumer loans secured by real estate.
The central bank plans to gradually tighten the values of macroprudential limits in the IHS and unsecured consumer credit segments to the levels characteristic of classic mortgages on the primary market and unsecured consumer credit, respectively. This is due to a significant portion of loans issued in these segments going to borrowers with high debt-to-income ratios, who are more likely to default.
Despite these measures, the Bank of Russia has not announced any new measures to reduce risk levels in the IHS and unsecured consumer credit segments, as per the statement. The central bank has also not implemented any changes to the quantitative limits on mortgages for individual housing construction or consumer loans secured by real estate, as per the statement.
- The Bank of Russia's measure to reduce macroprudential add-ons for loans to purchase apartments under construction, effective from September 1, highlights an intent to cool down the housing market and limit the chances of defaults that could impact the banking sector's financial stability.
- Beginning October 1, the Bank of Russia will implement macroeconomic limits on mortgages for individual housing construction and consumer loans secured by real estate, aiming to curb excessive household borrowing and prevent overheating in the housing market, while ensuring prudent lending discipline among banks and reducing vulnerabilities in the consumer credit market.
