Revving Mortgage Market Seen Stalling in '09

VedomostiDeltaCredit has been forced to adjust its mortage rates, asking up to 29 percent for ruble-denominated loans.
The first half of 2008 was an exceptionally successful period for the mortgage market, which saw a 67 percent increase in loans issued from the same period a year earlier, according to a report from the Agency for Housing Mortgage Lending.

But the crisis ruined everyone's forecasts -- the last three quarters saw growth of only 25 percent, and the year-end results will show 608 billion rubles ($19.6 billion) to 630 billion rubles taken out in mortgages, compared with 556 billion rubles in 2007, the report says, suggesting growth in 2008 of just 9 percent to 13 percent.

From June 2007 to November 2008, the percentage of long-term loans (more than three years) to individuals from small mortgage lenders (ranked below 300 according to assets) fell from 54 percent to 4 percent. Midsized mortgage lenders (above 300) saw a drop in long-term loans to 8 percent from 33 percent.

The country's three largest mortgage banks as of November also lowered the number of long-term loans they were giving: Sberbank by 35 percent compared with October, VTB-24 by 34 percent and Gazprombank by 65 percent.

In the fourth quarter of 2008, VTB-24, Sberbank, Raiffeisenbank, DeltaCredit and another four or five banks were the lenders giving out new mortgages, the agency said.

Banks have also tightened the conditions under which they are granting loans, most notably by no longer considering unofficial sources of income and requiring down payments.

As of Dec. 17, the report said, the loan-to-value ratio on the secondary market was 73 percent and 63 percent for new housing.

Adding to the pressure, nearly all banks adjusted their mortgage rates, and loans in rubles grew considerably more expensive than those in foreign currencies.

As of Dec. 17, according to data from mortgage broker CreditMart cited by the agency, Sberbank's ruble mortgage rates were 13 percent to 15 percent per year. Alfa Bank's figures were 19.4 percent to 23.7 percent, and DeltaCredit asked for 25.5 percent to 29 percent (as of Monday, the lowest rate on their web site for a ruble-denominated loan was 25 percent).

Borrowers have been turning to loans in foreign currencies as a more affordable option. For the first time since the second quarter of 2005, the percentage of nonruble mortgages rose by 2.2 percentage points to 15 percent, the report said.

The most foreign-currency mortgages in the third quarter of 2008 were given in Moscow (50.6 percent), St. Petersburg (21 percent), the Moscow region (30.6 percent) and the Primorye region (27 percent).

These figures suggest that missed mortgage payments and defaults will go up in the future, according to the agency, as the weakening ruble makes it harder to repay the loans.

Refinancing mortgages has also grown considerably more difficult. In early 2008, the Agency for Housing Mortgage Lending, according to its own figures, was purchasing 35 percent of banks' mortgage loans.

Toward the end of last year, the figure had risen to 80 percent, and the agency predicts that it will reach 95 percent in 2009.

The increased difficulty in obtaining mortgages is cutting demand and will lead to a fall in prices for real estate.

"It makes sense to expect the largest corrections in real estate prices in regions where the mortgage lending rate was more than 20 percent, the volume of mortgage lending is decreasing and the number of apartment purchases is declining," the agency's analysts concluded in the report, without identifying specific regions.

A forecast for 2009 should be made based on the figures for the second half of last year, or roughly 250 billion rubles in loans, said Alexei Dorosh, the director of CreditMart's sales department. Even the figure of 250 billion rubles -- possible in the second half of 2009 -- looks unlikely for the first six months.

As a result, Dorosh said, a maximum of 400 billion rubles in loans, up to 330 billion rubles of which will be new mortgages, can be expected in 2009.

Mortgage resale and refinancing for borrowers looking to switch from foreign currencies to the ruble will make up the remainder, he said.