“Gazeta”: “Government proposes mortgage relief plan”
Mortgage loan rates will be reduced at the expense of would-be pensioners.
Prime Minister Vladimir Putin asked the banks on Tuesday to lower the average mortgage loan rates by a third. To attain this goal, the prime minister proposed that the banks should issue mortgage bonds. Some 20% of the country's pension savings could then be invested in them. Experts say this is an elegant move which, however, will not fundamentally change the situation on the mortgage market.
Putin talked about the need to reduce mortgage loan rates at a meeting of Vnesheconombank's supervisory board. Today, the average mortgage rate is 14.5%, the prime minister said. "It is too high for people. To make mortgage loans more affordable, we must aim for mortgage rates to be no higher than 10%-11%," Putin said. In order to implement this plan, which, however, is "not a directive," he proposed investing up to 20% of the country's pension savings in these bonds.
Today, Vnesheconombank (VEB) manages pension savings amounting to 470 billion roubles. Upon receipt of new funds in the first quarter of next year, this total will increase to 690 billion roubles. Consequently, [the bank's] investments in mortgage bonds may amount to as much as 138 billion roubles. A month ago, the government approved an Investment Declaration giving VEB the right to invest funds in mortgage bonds from November 1, 2009. Putin thinks that the money in the National Welfare Fund could also be invested in mortgage bonds. "This will substantially reduce mortgage rates, making mortgage more attractive for a greater number of Russians," VEB's head Vladimir Dmitriyev explained.
However, there may be some obstacles to this plan. The first issue of mortgage bonds was registered at the end of 2006. No more than a dozen such issues have appeared since then, according to Vladimir Bragin, an analyst with Trust Bank. The total of mortgage bonds circulating in the market today amounts to about 30 billion roubles. "The bulk of them are non-liquid, non-marketable issues which could be kept on the books of companies affiliated with banks," Bragin said.
Thus, VEB's investment will actually put an end to the mortgage bond market in Russia. "There is actually no such market in Russia now," says Vladimir Tikhomirov, chief economist at URALSIB Bank. "VEB investments will certainly weaken the liquidity of this market. It will not be so easy to get rid of these papers while being the main player on this market." However, Tikhomirov recalls that real estate is, traditionally, one of the most reliable investment instruments for long-term money. "Besides, now is an extremely good time for investment," he adds.
Vladimir Putin himself set forth the second problem.
"I know that the attitude of the bank's managers to this issue is not so simple since the bank cannot make too much money in this sector," the prime minister said. Even with a most favourable economic situation, Bragin says, the annual profit rate for such bonds will not exceed 8% to 11%. However, Putin believes that such investment will allow VEB to exercise its key function - that of a development bank.
Asked whether these investments will help boost the mortgage market, Tatiana Lozovskaya, managing director of Moskommertsbank, answered that "they will merely help launch mortgage programmes." She thinks these investments are not too substantial for the market, therefore they will not help cut real mortgage rates. By early 2009, the market for issued mortgage loans amounted to 631 billion roubles. Over the first nine months of 2009, the banks issued 91.5 billion roubles' worth of such loans. Putin hopes that VEB's investment will allow the bank to increase this to the level of two years ago.
"It is not worth hoping that these funds will pave the way for a reduction in mortgage rates and fully revive the market. The banks will start reducing these rates only when the economic situation improves," says Natalia Orlova, leading economist at Alfa Bank. In any case, only a limited number of banks will be able to use pension savings, she adds.
Ksenia Yeryomina
