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. Last Updated: 07/27/2016

Banks to Hike Mortgage-Lending Rates

MTUlyukayev said some banks may temporarily halt issuing mortgage loans because of an increase in borrowing costs.
Local banks will increase mortgage-lending rates and some may temporarily stop issuing home loans because of the rise in borrowing costs, said Alexei Ulyukayev, the Central Bank's deputy chairman, in an interview published Thursday.

Banks rely on foreign funding to finance some lending to domestic consumers and will curb mortgage lending since the collapse of the U.S. subprime mortgage market boosted global borrowing costs, Ulyukayev told Rossiiskaya Gazeta.

"Some banks may temporarily halt issuing mortgage loans to individuals," Ulyukayev said. "Others will consider by how much they can currently increase interest rates for mortgages."

Russky Standart has stopped making mortgage loans to consumers amid soaring refinancing costs. The halt by Russky Standart, which has a lending portfolio of $300 million compared with $4 billion in credit-card loans, applies until October.

An rise of 2 percent in global borrowing costs for banks would boost mortgage borrowing costs for domestic consumers by 1.5 percent, Ulyukayev said.

"The current liquidity problems will affect the banking sector's growth rate," Alfa Bank said in a research note Thursday. Banking-industry assets will increase no more than 39 percent this year and 20 percent in 2008, Alfa said.

"The mortgage market seems to be the most vulnerable to the slowdown, as lack of access to long-term funding will significantly reduce banks' ability to develop these products," the note said.

Alfa cut its forecast for retail lending next year to $140 billion, implying a 33 percent expansion from this year, according to the note. Total outstanding loans to individuals stood at 2.56 trillion rubles ($100 billion) in June, according to the Central Bank.