Report: Govt not to flood market with money to cut mortgage cost

MOSCOW, Feb 26 (PRIME) -- The Russian government will not flood the country’s market with money to cut mortgage interest, Finance Minister Anton Siluanov said in an interview to Rossiya 24 television channel broadcast late on Monday.

“The issue here is not about the government flooding the market with money to cut mortgage rates. We are talking about system-wide measures and selective measures. System-wide measures include reduction of inflation forecasts and inflationary expectations…Our goal is to reduce inflation with every measure possible to the target level of 4%. The lower inflation is, the lower the cost of credit is, including mortgage loans,” he said.

Selective measures include subsidization of mortgage loans for families that have two or more children, he said.

But a switch to mandatory escrow accounts in the construction industry may lead to a temporary increase in housing costs, he said.

From July 1, all developers that attract individuals’ money through shared-equity construction plans are to switch to escrow accounts.

“Of course, the price of housing may rise. In the end, it will be defined by supply and demand. We don’t rule out a temporary price rise on the one hand. But on the other, it eliminates all risks from which individuals suffer today when they transfer money to developers,” he said.

Currently, developers are able to spend the money on any goal they like, but with escrow accounts, the money will be stored in banks which will transfer it as loans to developers specifically for construction of housing. Interest rates of the loans will be high, as the average cost of a loan provided to a developer from an escrow fund stands now at about 8%, he said.

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