Mortgage-2017: it’s not time for financial romance

No recession has taken place

According to the chief of the department of partner sales of Avers Bank PLC Aliya Fakhrutdinova, last year in Tatarstan there were issued 35.84 thousand mortgage loans. The increase was 22% compared to 2015. The total volume of mortgage housing loans increased by 29% to 48.61 billion rubles. This trend is characteristic for the Russian market: by the end of 2016, according to the Agency for housing mortgage lending (AHML), the volume of issued mortgages in Russia increased by almost 30% and amounted to 1.475 trillion rubles.

By the end of 2017, the agency forecasts that the volume of mortgage loans in 2017 will increase by 15-20% and reach a record 1.8 trillion rubles. Do the sellers of real estate share this point of view? The head of the Agency Happy House Anastasia Gizzatova said that the abolition of the subsidy program has not had a negative impact on the market, what the realtors were afraid of. In many ways, it happened because the interest rates of many banks have decreased. But the super low rates that some of the banks provide can only operate for a limited number of developers or contain some additional fees or commissions.

The head of the Agency Happy House Anastasia Gizzatova said that the abolition of the subsidy program has not had a negative impact on the market

''I do not have a feeling that state support has ended. Because the flow of customers has even increased. What is more, for primary housing,'' agrees the head of the crediting department of Flat real estate agency Venera Evstratova. ''It's hard to say why this is happening. We cannot say that banks have reduced rates significantly. Perhaps, the objects have become interesting for the customers because they are at a higher degree of readiness.''

Whether will the primary mortgage market shrink without the programme of state support? Anastasia Gizzatova notes that the number of transactions on new buildings is not going to reduce: ''I think the ratio will be 50:50, and in future the primary housing will even increase its share on the market.'' In her opinion, by the end of 2017, a lot of residential complexes will be completed. There will be a conflict of interests of the primary and secondary markets. The secondary market will experience a crisis at the end of 2017.

Venera Evstratova also believes that the primary market will shrink because clients have not become less without the state support program. Because many people from other regions come to the Republic, and many parents buy housing in Kazan for children-students. So, there are no extra housing in the Republic. Aliya Fahrutdinova highlights the role of banks in supporting the housing market: 'The joint promotional programs of developers with the banks create demand. Rates of some banks can be 8.5-9%.''

The rate decrease is minimal

The head of the agency Happy House believes that the housing market of Tatarstan is being overstocked. ''Every year the region have new 2.5 million square meters. That's a lot. The market cannot absorb such number of proposals. In 2016, a lot of housing will be introduced again, particularly apartments of economy class on the periphery of the city. This will lead to lower prices,'' predicts the realtor.

Are lower mortgage rates expected in Tatarstan? AHML predicts that by the end of 2017 mortgage rates will drop to 11%, and in 2018 for the first time they will be below 10%. ''The interest rate on mortgage depends on the external market,'' says Anastasia Gizzatova. ''I do not see real economic factors for a rate decrease. It will rather be some artificial actions on the part of the government of the Russian Federation. But the government now has no additional funds and reserves to subsidise mortgages. I can't say that the rate will drop significantly because the real inflation has not fallen as the Ministry of Economic Development assures. The decline may have a short-term effect, or should be accompanied by an improvement in the economic situation, which we are not observing.''

Venera Evstratova believes that a decline in interest rates on mortgages is more likely to occur on the secondary market

Venera Evstratova believes that a decline in interest rates on mortgages is more likely to occur on the secondary market, ''A few years ago when there were programs of government support, mortgage rates on the secondary market was much lower — from 8%. I think this year they will decrease by 1-1.5%.''

Financial literacy = saving

«Today there is an interesting trend on the real estate market,'' said Anastasia Gizzatova. ''On the one hand, people want to buy housing and they are asking to introduce a program with no down payment. On the other hand, there are those who buys an apartment with a maximum down payment to get a feasible mortgage. Financial romantics have become less. People consider the offers of the banks, examine them for hidden fees and choose a bank with the best conditions. Financial literacy, which has been caused by saving, become quite common.''

Financially literate people know about the program of refinancing of mortgage loans. For example, Avers Bank has such program that is called Perezagruzka 2.0. The borrower is freed from the debt to one bank and becomes a debtor to another one but under more favourable terms. One can lower the interest rate on the loan, and, thus, to reduce the burden on the family budget. Now within the framework of the program, the interest rate is from 12.0% per annum. The amount of an issued loan from the market value of the pledged property is from 70%. The minimum period of service of the debt from the primary creditor shall be six months. No overdue payment shall be on the refinanced debt. It is also necessary to submit a certificate from the primary lender on full repayment of the debt to the bank within 10 working days from the date of issuance of a new credit. Within 15 working days from the date of issuance of the new loan, one must transfer the collateral (or to provide a receipt on submitting of the pledge agreement in Rosreestr for registration) under the newly concluded agreement.

''The refinancing program is very interesting for us even as individuals because we are also property buyers,'' says the head of the agency Happy House. ''Our employees completed the refinancing in Avers Bank because we've liked how quick this procedure is and how substantial the savings are. Many reject this possibility because they think that it is necessary to incur additional financial costs or to collect a large package of documents, but it is not.

What opportunities does the refinancing give?

''First, a credit ''loses weight'' by a few percents,'' says the head of the partner sales department of Avers Bank Aliya Fahrutdinova. ''Second, due to the individual order of consideration of the application, the bank will consider your wishes and life situation when drafting a new contract. For example, if you want to reduce the monthly payment more, you can increase the loan term up to two years from the end of the ''old'' contract. Third, it is possible to change the composition of the participants in the transaction for any loan. If you have had changes in your family or career since the conclusion of the contract on the mortgage, you will probably want to change the composition of the participants, the bank will meet your wishes.''

Aliya Fakhrutdinova: ''The credit ''loses weight'' by a few percents due to refinancing''

Advice from experienced professionals:

Before taking a mortgage:

• Analyse all credit offers of the banks, paying attention to the size of the down payment, interest rate, monthly payments, hidden fees, the amount of insurance, etc.
• Pay attention to the fee for account maintenance, transfer of money to the developer.
• Calculate all possible expenses for the entire crediting period.
• Find out what is the procedure for early repayment of the loan. Will the loan term change or you can reduce the monthly payment? Avers Bank makes advances in both cases.