The end of preferential mortgages is near. What will happen next?

Since the spring of 2020, the Russian Federation has launched a mortgage program aimed at state support for the construction of residential buildings. The government adopted it as an anti-crisis measure. As of July 1, 2021, the project format has undergone important changes. The rate increased from 6.5 to 7%. The maximum loan amount, on the contrary, has decreased and is now equal to 3 million rubles for everyone. Previously, residents of the country could take out a loan of 6 million, and those living in the Moscow and Leningrad regions, St. Petersburg and Moscow, up to 12 million.

After the reduction in lending amounts in big cities, there are almost no people left willing to take advantage of preferential mortgages. After all, living space in megacities is so expensive that mortgage funds will not cover even 30% of the cost of the apartment.

What happens to already approved applications?

In the capital, the number of approved loans reaches almost 220 thousand. The limit allows for the issuance of about 135 thousand more subsidies, which can be issued in July. The numbers are approximate, since one person sometimes receives several applications to different lending organizations.

By what rules will a preferential loan be issued for already accepted applications? If a client received approval for his loan before the beginning of July, but the agreement will be signed later, after the limit has been reduced, what norm will apply to him? Financial experts explain that in case the requested loan exceeds 3 million, the client will have to increase the down payment amount. This is necessary to ensure that the final loan amount does not exceed the allowable amount.

But a tariff of less than 7% is still available. The average percentage of subsidies issued under the program is 5.76. Financial institutions have the right to issue money at the rate at which the loan was previously agreed upon.
Lowering the maximum threshold by 4 times for Muscovites left mortgage holders outside the capital’s new real estate market. Now, to purchase an apartment in a building under construction, you must have savings exceeding 2/3 of its price. Borrowers who had the opportunity to make a standard down payment (0.2 or 0.3 of the total amount) remained outside the program. Now only wealthy people who are able to pay half the price of housing in a down payment can apply for loans.

Consequences of the program

A low mortgage rate ideally should have contributed to an increase in consumer interest in new buildings, helped developers, and made residential property more affordable. Indeed, the sale of apartments in new buildings has increased at a record level, but at the same time the cost of living space has increased, especially in megacities. Based on this, it was decided to limit mortgage benefits.

Fall in demand

In big cities, the influx of potential mortgage holders began to decrease in July. After all, 3 million, considering the average cost of housing, is quite a bit.
In Moscow, where the standard of living is higher than in the regions, demand in the primary market is also expected to decline. The level of interest decline largely depends on the actions of developers. Will developers increase the price per square meter or sell real estate at a fixed price? How generous discounts will customers be offered?

What will replace a preferential mortgage?

To maintain the same interest in new buildings, development companies are planning to create special mortgage schemes. Construction firms, teaming up with lending banks, are making plans to provide housing subsidies.
Financiers confirm the introduction of programs alternative to preferential housing loans in new buildings. Lenders and developers intend to offer consumers their own terms and benefits. The rates, of course, will be lower than those contained in the government decree.

In addition, the range of family mortgage borrowers has expanded significantly. Previously, only families raising two or more children were eligible for the program. Moreover, at least one of them should have been born after 2017. An exception was made only for those raising a child with disabilities. From July 1, the program also includes families with an only child born no earlier than 2018. For family lending in Moscow, as before, the maximum loan amount is 12 million.

But the percentage of “family mortgage holders” in relation to those who expected to receive housing at a preferential rate is small. Experts are already predicting a 70% drop in demand. Time will tell what lenders and developers will come up with to restore it.

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