The Bank of Russia has suggested introducing restrictions on mortgage loans in the mass segments of the market (70% of the total mortgage market), RBC news agency reports.
The regulator wants banks to create more reserves when approving mortgage loans to the debt-ridden clients. Restrictions may come into force in the middle of 2020. As of today, banks have to consider the debt size of a client only when issuing unsecured loans.
“The growing pressure on banks aimed at reducing the number of mortgage loans is a sign that the regulator is seriously considering a mortgage crisis,” says Sergei Khestanov, economist and assistant professor at the Russian Presidential Academy of National Economy and Public Administration (RANEPA). “When real estate prices drop by the size of the first payment, the banking system faces big risks. The growing possibility of this scenario has forced the regulator to take preventive measures, such as increasing reserve requirements. Just to be safe.”
One might recall that the US mortgage crisis in 2007 resulted in the 2008 great economic collapse.