Starting July 1, 2025, mortgage borrowers will no longer be required to make extra payments due to interest rate reductions.
The Bank of Russia has announced the introduction of a new standard aimed at improving conditions for mortgage borrowers. Known as the "Standard for Protecting the Rights and Lawful Interests of Mortgage Borrowers," this regulation comes into force on July 1, 2025, as part of broader regulatory changes aimed at reducing systemic risks in the mortgage and car loan markets[1].
One of the key points in this standard is the prohibition on banks receiving remuneration from developers for reducing the interest rate. This prohibition is effective as of the current year and is designed to put an end to the practice of charging for a reduced interest rate on mortgage loans[2].
The new standard also includes macroprudential limits on mortgage issuance to borrowers with increased risks. For instance, loans to borrowers with a high debt burden, low down payment (no higher than 20%), and unstable income will be restricted[1]. Financial institutions can still issue such mortgages but only up to a certain limit.
For mortgages where the borrower's debt burden exceeds 50% of their income and the down payment is 20% or less, the share of such loans in the total mortgage portfolio will be limited to 2%[1]. Mortgages with terms exceeding 30 years are also limited due to their growing share, which rose from 10% to 14% over the past two years, raising concerns for systemic stability[1].
Similar limits apply to car loans issued to citizens with high debt burdens, where the share of such loans will not exceed 20% of the total volume of car loans provided by banks[1].
The rationale behind these new limits is to curb risks associated with high indebtedness among Russian citizens, preventing excessive borrowing that could threaten financial stability[1].
The new standard is expected to benefit mortgage borrowers by reducing the overall cost of their loans. By prohibiting banks from receiving remuneration from developers for reducing the interest rate, it aims to prevent an increase in housing prices due to reduced interest rates[3].
The Bank of Russia has also introduced a new standard to prevent credit institutions from charging additional fees for setting a reduced interest rate on mortgage loans[4].
This new standard is a significant step towards improving conditions for mortgage borrowers and is part of the Bank of Russia's efforts to protect the rights and interests of mortgage borrowers[5]. The TASS agency reported the news about the new standard[6].
[1] https://www.bankofRussia.ru/private/news/2023/03/15/167546265/ [2] https://tass.com/economy/1346690 [3] https://tass.com/economy/1346690 [4] https://tass.com/economy/1346690 [5] https://tass.com/economy/1346690 [6] https://tass.com/economy/1346690
- The announcement by the Bank of Russia about the new standard for protecting mortgage borrowers' rights is a significant move in the realm of policy-and-legislation, a sector that intertwines closely with business and politics.
- Among the key aspects of this standard is the banking prohibition on receiving remuneration from developers for reducing interest rates on mortgage loans, a regulation aimed at modifying the general-news landscape of the housing market.
- Furthermore, the new standard introduces macroprudential limits on high-risk mortgage issuance, targeting loans with unstable income, high debt burdens, and low down payments, a policy that could impact the broader financial landscape of the business world.
