The concept of “mortgage” did not appear in Russian so long ago. However, only a few are aware that services have been available since 1917 that enable the country’s residents to take out cash loans for the purchase of housing.
It should be noted that such operations were very popular in those days because such transactions were strictly regulated. However, when the distribution of living space began, this practice was lost and was only restarted relatively recently.
Unfortunately, such transactions are connected today – citizens with the most unpleasant things. This is not surprising since the problems with mortgage lending in Russia and the prospects for the development of this type of service are currently rather acute. What Happens to Loans? Why are they less popular now and cause so much criticism?
Own real estate from citizens and subsidies
First of all, the problems with mortgage loans. You start with the fact that today only 10% of citizens have their own living space, which exceeds 18 m² per person in terms of the total area. Based on this, only 1% of people can buy real estate with earned money.
Ultimately, citizens see no other way out of how to get a mortgage, albeit on the most unfavorable terms. In addition, the majority of borrowers should receive government support due to the economic situation. However, this is not always possible because a large number of the country’s residents want to receive government grants.
Today, more than 20 million citizens of the Russian Federation want to get a mortgage. These crazy numbers make it clear that developers have to build houses all the time, which is almost impossible in such a short time.
The main problem with mortgage loans in Russia lies in the fact that the state will be able to provide all those in need with social programs for only 26 years.
It is also worth considering that the basics regarding mortgage lending in the country are still pretty rough. Therefore, there are additional problems with both home loans and subsidies.
Does it seem that there is a relationship between the improved economic situation in the country and the problems in developing mortgage loans? Yes, about 15 years ago the situation in the state was very complicated and the rate of inflation was literally off the scale. Today the situation looks much more positive but is still far from complete stability. This primarily affects the credit system.
Due to the unstable situation, citizens are elementary; they do not want to leave their money with banks. As a result, government lending organizations simply don’t have room to lend to the population. This also leads to higher annual rates and other adverse credit conditions.
Ultimately, a mortgage is not a mass product, but a service that not everyone can afford.
General economic situation
Everyone knows what a mortgage is, a loan that pays off after a long time. Such a loan is usually granted for a period of 20 to 30 years. Hence the problems of mortgage lending in the Russian Federation.
The fact is that banks that offer similar long-term loans must at least have a certain payment guarantee in order not to lose their economic stability. The borrowers themselves want to be sure that they can pay for housing for which they have already made an impressive down payment. But how can you get guarantees if the population’s income changes regularly? This leads to financial jumps and falls, which in turn are closely related to the general economic situation around the world.
On this basis, credit organizations are forced to take risks into account and, if a loan is not paid, impose fines on the borrower. For this reason, not everyone can take out a mortgage today, since, in the event of a delay or inability to repay the loan, a person will have to provide other resources that the bank can accept due to the outstanding debt.
Low solvency of citizens
When we talk about problems and prospects for mortgage lending, you need to understand that this industry depends directly on the people of the country, more precisely on the amount of their income. Today, more than 60% of the population have to improve living conditions. It seems that a mortgage can be a real salvation for these people. Unfortunately, not everyone can provide the bank with the necessary documents to confirm the earnings situation.
Under the terms of mortgage loans, a loan is granted to a person if the amount of the monthly payment is no more than 40% of the official income of a citizen and his relatives. So if the borrower pays about 30,000 USD every month, he must earn at least 75,000 USD.
Unfortunately today the average wage is not reaching this level. This leads to additional mortgage problems. Many citizens state higher salaries in their certificates to get a coveted loan and then fail to meet their loan obligations.
Monopolization of the market
The primary housing market in Russia remains “opaque.” There are not so many companies involved in building houses, so there is practically no competition between the companies. For this reason, developers can afford to keep property prices at a relatively high level, resulting in actual monopolization and an increase in interest rates on initial and subsequent installments of loans.
Accordingly, the only solution to problems mortgage loans get lower prices on new buildings. This requires the development of the hardware store. When new construction companies are created in the country, not only the housing costs are reduced, but also the population benefits. Only then will a mortgage become a public product.