The harbinger of a bubble. What threatens the Russian mortgage boom

© RIA Novosti / Vladimir Astapkovich in fotomonsterflash residential complexThe harbinger of a bubble. What threatens the Russian mortgage boom© RIA Novosti / Vladimir Astapkovich the image Bank

MOSCOW, 20 Mar — news, Natalia Dembinski. Last year, Russian banks issued mortgage loans of a million — a third more than in 2016. And the record was the share of loans with an initial payment less than 20% — about a third. Skeptics claim: this is very similar to the emerging bubble that will burst with the next crisis and falling incomes. Whether talking about the boom of the mortgage market and there is great probability of the realization of the American scenario of the collapse — in the material RIA Novosti.

Boom or rapid growth

In recent years the mortgage market in Russia is growing rapidly: real estate prices decline, go down and interest on the housing loans. Although the mortgage boom in Russia is still very far away.

For example, in Europe the amount of mortgage loans is 60% of GDP in the Netherlands is 110%. And in Russia — 5%. A few years ago, the volume issued in the country housing loans did not exceed 1% of GDP.

In 2015 the total debt of citizens, the share of mortgage loans accounted for only 20%. In developed markets the proportion is the opposite: 80% of loans — mortgage, 20% to short-term unsecured loans.

Currently, the share of housing loans in the Russian market increased to 40%, and by the end of the year, according to industry, the balance is about fifty-fifty. In 2017 the debt of citizens under the mortgage has reached five trillion rubles by the end of 2020, according to the forecast AHML, this figure will be doubled. That is why in the mortgage segment as one of the fastest growing — now strive to reach all banks.

That mortgage have been doing for almost all financial institutions, some experts see the danger.

This sin banks during the period of origination of the mortgage market in Russia (2007-2008), giving out loans with an initial contribution of 5%. Today more and more regulated, and 20%, which the market considers as a conventional safe threshold is one-fifth the value of the property and a fairly significant amount.

Analysts say that a certain percentage of mortgage loans with first payment below 10% is always there and they are quite risky. But this does not indicate the origin of the bubble — it causes are usually different.© RIA Novosti / Natalia to Seliverstova in fotoreceptoriThe harbinger of a bubble. What threatens the Russian mortgage boom© RIA Novosti / Natalia to Seliverstova in fotoreceptori

«First and foremost, it is the rise in property prices, granting loans through mortgage brokers, who never accept responsibility, but only to bring the customers to the banks, and the decrease in the initial payment, as it was in the United States, to almost zero,» — said Ivankina.

High interest rate risk

The bubble on the Russian mortgage market may not swell because of the abundance of mortgage lenders and low down payment, and because of the high interest rate risk arising on banks ‘ balance sheets.

This is because banks give housing loans under fixed interest rates for decades, but do not have sufficient sources of funding.

Such, for example, happened in the 1970-ies in the U.S. market, and more than half of the savings and credit system of the United States was destroyed. After the Persian crisis dramatically increased the price of oil in the US economy have substantially increased interest rates. As a result, banks failed to refinance cheap a huge number of mortgage loans to a fixed interest rate.

«If inflation upwards, increasing the key rate will lead to the fact that all of these portfolios of mortgage loans at low interest rates will become unprofitable. This is the global strategic risk of the Russian banking system», — says Ivanov.© http://graphics8.nytimes.comFannie Mae and Freddie MacThe harbinger of a bubble. What threatens the Russian mortgage boom© http://graphics8.nytimes.comFannie Mae and Freddie Mac

To reduce the risks, you need to dramatically increase the volume of the market of long-term mortgage-backed securities. But here another problem arises.

In Russia, the market for such instruments is insufficiently developed. Buyers of the bonds will not be so much as, for example, in the United States. However, too rapid and uncontrolled development of the mortgage bond market in the United States was the key cause of the global financial crisis of 2008.

Most analysts are confident the us scenario is the collapse of the mortgage market is unlikely. All the matter in a fundamentally different system of funding of mortgage transactions.

«In the United States, the principle of securitization. That is, the demand for a mortgage is not created by investors, and households. And while the last pay — all more or less normal,» said Shiraki.

In Russia the model is different: the funding comes at the expense of state companies, and the market is regulated harder.