The ruble’s depreciation kick-starts investment growth in mortgage residential lending

However, total liability on loans with delinquent payments more than 180 days stood at 1.88% as of April 1, 2014, up by 0.11 p.p. relative to the value seen as of March 1, 2014. The average weighted interest rate on ruble-denominated MRLs provided since the beginning of the year kept declining in 2014. As of April 1, 2014, it was 12.2%. The average weighted interest rate on ruble-denominated MRLs provided within the month stood at 12.0% in March 2014.

According to the data provided by the Central Bank of Russia, in Q1 2015 credit institutions provided 208607 residential loans (RLs), including 198082 mortgage residential loans (MRLs) worth Rb 334,73bn and 10525 unsecured residential loans (URLs) (the difference between RLs and MRLs) worth Rb 11,65bn. The total volume of MRLs in monetary terms provided in Q1 2014 was by 47.43% bigger than the volume of loans provided during the same period of 2013. The remaining mortgage balance on MRLs amounted to Rb 2,81 trillion as of April 1, 2014, by 34.11% above the value seen on 1st of April last year. The share of foreign exchange denominated MRLs in monetary terms accounted for 0.51% of the total volume of mortgage loans provided in Q1 2014, and by 0.73 p.p. below the share seen in Q1 2013.

In Q1 2014, the share of URLs in the RLs volume shrank by 0.73 p.p. by number of loans compared to the value seen in Q1 2013 and stood 3.36%, an increase in monetary terms by 0.09 p.p.. The share of RLs in the volume of consumer loans (CLs) in Q1 2014 stood at 17.96%, by 4.63 p.p. above the value seen in Q1 2013.

According to the data provided by the Central Bank of Russia, overdue liability on MRLs amounted to Rb 40,60bn as of April 1, 2014, or Rb 25,76bn on ruble-denominated loans and Rb 14,84bn on foreign exchange denominated loans. Total overdue liability as of the end of Q1 2014 was 2.4% above the value seen as of January 1, 2014, whereas its share in the remaining mortgage balance (1.45%) shrank by 0.5 p.p. during the same period. Overdue liability on ruble-denominated MRLs increased in monetary terms compared to the share seen at the end of Q4 2013 and decreased as a percentage of the remaining mortgage balance, namely to 0.96% as of April 1, 2014 from 1.0% as of January 1, 2014. During the same period, overdue liability on foreign exchange denominated MRLs increased to 13.22% from 12.69% by volume and as a percentage of the remaining mortgage balance.

The growth in volume of MRLs amid the ruble's weakening against the US dollar and the Euro is indicative mostly of the investment nature of this growth. In particular, in Q1 2014, Sberbank issued mortgage loans in a volume by 87% above the volume issued in the same period last year, while VTB24 issued mortgage loans by 63.3% above the volume issued during the same period of 2013. At the same time, OJSC AHML (The Agency for Housing Mortgage Lending) refinanced 8923 mortgages worth Rb 13,60bn in the period between January and April of 2014, by 14.23% less in quantitative terms and by 8.42% less in monetary terms than it did in the corresponding period of 2013. Vnesheconombank (VEB) intends until December 31, 2014 to purchase at a par value the bonds which seven banks and OJSC AHML issued as part of VEB's program on vestment in affordable housing construction projects and mortgages in 2010–2013, worth Rb 92,14bn. In the meantime, Raiffeisen Bank suspended since May 1, 2014 the provision of mortgages denominated in U.S. dollars and Euros, which is most likely due to higher risks relating to the provision of long-term foreign exchange denominated loans.

G. Zadonsky, researcher.