Central bank sees signs of mortgage overheating

SOCHI, Sep 29 (PRIME) -- The central bank has registered the signs of overheating on the Russian market of mortgage loans, Chairwoman Elvira Nabiullina said on Friday during the International Banking Forum.

“We see signs of overheating in mortgage lending. Mortgages grow very fast, and they grew by 30% if we look into 12 months. We are also concerned about the quality of loans here and their impact on the housing market,” she said, adding that the central bank was also concerned with the price of housing.

“Affordability of housing is more important for our people than affordability of mortgage loans … We are concerned about the differences in prices … on the primary market and on the secondary market … Right now, the difference in prices between the primary and the secondary market stands at 40%, and even reaches 50%,” she said.

The central bank will continue tracking the quality of mortgage loans, and will impose tough measures swiftly in order to prevent system-wide risks, she said.

The regulator is also concerned about the quality of retail loans and wants to reduce provision of consumer credits to the borrowers with a debt burden of more than 80% to the lowest level possible, Nabiullina said.

Also, the authority is working on a bill that raises fines for banks for dishonest sales of their products by several times.

The central bank plans to inspect banks in the autumn, and may make banks buy back some products for the first time ever if it finds any serious violations.

“We see some improvements here,” she said, referring to the protection of consumer rights.

“But some problems persist. I would like to remind that we have the right to suspend sales of some products and demand a buyback if these products were sold dishonestly. This spring we discovered several violations that banks and especially large banks made when selling insurance and investment products. We will repeat these inspections this autumn, and we will implement these tough measures if we see repeat violations.”

She also said that the regulator registered a slowdown in the growth of corporate lending in September, and a return of cash to banks in the form of deposits with attractive interest rates.

The central bank also plans to return to regulation of the ecosystems of banks in January–June 2024, and would start working on transition of banks to the oversight ratings that would depend on different rates of their contribution to the Deposit Insurance Agency among other things next year, she said.

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