In 2024, rates on joint mortgage programs of banks and developers may drop to “pre-war” levels

In 2024, rates on joint mortgage programs of banks and developers may drop to the “pre-war” level, and depending on the loan repayment period will range from 3% to 16%.

This opinion was expressed by Elena Dmitrieva, First Deputy Chairman of the Board of GLOBUS BANK.

According to her, in 2023, thanks to a significant reduction in the discount rate from 25% to 15% and the relaunch of the eOselya state mortgage program, the foundations were laid for the active development of banking mortgage products with an important emphasis on the purchase of housing under construction.

She recalled that in September last year, rates on joint programs of banks and housing developers had already decreased by 3%, and, depending on the down payment and repayment period, averaged from 7% to 19%.

“The development of the economy and the reduction of inflationary pressure allowed the regulator to significantly reduce the discount rate, which actually prompted commercial banks to develop credit products and mortgages in particular. At the same time, in 2024, a gradual reorientation of eOseli to the primary market is expected, which could significantly strengthen” “mortgage” competition in the primary market, and mortgage programs will become more flexible and attractive for potential home buyers,” the expert noted.

Elena Dmitrieva named a number of conditions that could affect a further reduction in mortgage rates in the primary market. Among them:

  1. Active development of the country’s economy and further steps by the NBU to reduce the discount rate (in the context of a rate reduction of 2-4 percentage points, bank mortgage rates may decrease by an average of 3%);
  2. The volume and consistency of receiving macro-financial support for Ukraine, which will cover a significant part of the state budget expenses (it is expected that in 2024 the volume of international assistance will range from $37 billion to $40 billion);
  3. Significant expansion of the state mortgage program “eOselya” for objects under construction (it is expected that in 2024 the number of loans under the state program “eOselya” in the primary market will increase to 20-25% of the total number of loans issued);
  4. Intensification of housing construction, especially for projects whose construction was suspended due to large-scale invasion;
  5. Developers’ strategy aimed at expanding opportunities for purchasing housing: accreditation for participation in the eOselya program, development and implementation of joint mortgage programs with banks, active development of their own installment programs.

The banker believes that in the context of a projected reduction in loan rates by another 3% in the primary market, joint mortgage programs of banks and developers with a repayment period from 3 years to 20 years will become the most popular:

  • “Mortgage for 3 years”: depending on the amount of the down payment, rates may be reduced to 4-9%;
  • “5-year mortgage”: under optimal conditions, rates can drop to 8-12%;
  • “Mortgage for 20 years”: in the first year of repayment the rate can drop to 3%, and for the next 19 years – to 15-16% per annum.

“In conditions of active economic development, commercial banks will significantly improve mortgage conditions for borrowers. At the same time, mortgage programs in the primary market can compete with the state program “eOselya,” predicts Elena Dmitrieva.

The expert spoke about the main characteristics of mortgage lending as of the end of 2023 and the beginning of 2024:

  • about 30% of the total number of mortgages issued in the primary market are accounted for by joint programs of banks and developers;
  • the average cost of an apartment purchased under joint programs of banks and developers ranges from UAH 2 million to UAH 3 million;
  • down payment amount – from 30% of the cost of housing;
  • the most popular are 1-2-room apartments ranging from 45 m2 to 70 m2;
  • the stage of readiness of the residential complex in which they buy housing with a mortgage is more than 50% (housing class – economy and comfort);
  • more than 80% of mortgage transactions are issued for a period of up to 20 years (accordingly, 20% of transactions are mortgages for up to 10 years);
  • more than 90% of completed mortgage transactions occur in Kyiv (mortgages are also actively developing in Lviv, Kamenets-Podolsky, Lutsk, etc.).

“One of the main advantages of a mortgage in the primary market is that the loan amount is fixed in hryvnia at the time of the transaction, and if the national currency exchange rate changes, the loan balance is not recalculated. That is, the borrower insures himself against inflation risks,” emphasized Elena Dmitrieva .

The specialist gave an example of a typical mortgage transaction under joint programs of banks and developers, concluded for 20 years (purchase of an apartment in a comfort-class residential complex in Kiev). Thus, an apartment with an area of ​​about 70 m2 will cost the borrower UAH 2.5 million, and the down payment will be UAH 750 thousand with payment of 30% of the full cost of housing. The loan amount is UAH 1.75 million, a one-time bank commission for providing a loan is provided in the amount of 1.99% of the loan amount (that is, UAH 34,825), and monthly loan payments will average UAH 21 thousand (at the same time, the interest rate is may depend on the terms of cooperation between the bank and the developer).

“The development of mortgages in the primary market is important not only taking into account the price for the buyer (purchasing housing at the construction stage will cost on average 30% cheaper), but will also stimulate the development of construction as one of the key sectors of the country’s economy,” Elena summed up Dmitrieva.

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