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Central Bank presented six options for regulating floating rate mortgages

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The Bank of Russia has proposed options for regulating mortgage lending at floating rates. This is reported by Forbes with reference to the regulator’s report.

It is noted that the Central Bank took into account international experience and formulated six scenarios. Among them, the introduction of a complete ban on lending to individuals at floating rates, limiting changes in interest rates or the term to maturity. Also, the Central Bank proposed to limit the circle of borrowers for this type of mortgage to those whose financial position is sufficiently stable at the time of applying for a loan and who are most likely to maintain this position in the event of a sharp rise in interest rates.

The regulator also proposed to grant the Board of Directors of the Central Bank the right to limit the share of floating rate mortgages in the total volume of mortgage loans, introduce premiums for floating rate loans, the level of which the Central Bank will be able to adjust depending on the market situation or change the procedure for calculating the debt burden indicator and calculate the average monthly payment , based on the maximum possible rate established by the contract or law.

“It is important to ensure that the use of such products by banks provides citizens with additional benefits, increases the availability of lending, and does not carry additional risks,” the Central Bank concluded.

The Central Bank’s report was published almost simultaneously with the instruction of Russian President Vladimir Putin to adopt a law that would regulate the procedure for changing floating rates on loans to the population, including mortgage loans, and the timing of repayment of such loans. According to the president, the law should better protect Russians who have issued such loans. The government and the Central Bank must make changes to the legislation by July 15, 2021. Prime Minister Mikhail Mishustin and the head of the regulator Elvira Nabiullina were appointed responsible.

Semyon Goldstein

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