Prospects
for development of mortgage lending
Isaeva P.G.
Russia, Dagestan state university
In modern conditions mortgage becomes one of the basic and affordable
ways of solving the problem of housing. The number of mortgage loans is
increasing not only in major Russian cities, but also on the periphery. It is
necessary to make much effort for further development of the market, both at
the Federal and at the regional and local levels. Only joint influence of a
number of factors such as government support and regulation of the mortgage
process, and the growth of welfare of the population will lead to formation of
positive image of mortgage lending and will become an additional impetus for
its development.
There are 4 groups of factors: socio-economic, political, personality
and behavioral. The first 2 groups of factors influence the character and
appeal of the mortgage, and they are to be managed by the state bodies. Their
impact depends on the state regulation, the degree of development of the
region, reducing of inflation, wage growth, the condition and prospects of
development of the housing market.
Political factors. Development of mortgage lending system is influenced by events
occurring in the legislative and political fields. The main objective of the
legislative base consists of defining clear conditions in the mortgage market,
which clearly single out the rights, duties and responsibilities of the
parties. The legal base protects borrowers from unfair methods of work in the
mortgage market and real estate market, and firms from unfair competition.
Political environment changes under the influence of laws, the activities of
state institutions, affecting the mortgage market participants. The number of
laws regulating the mortgage market is growing, which contributes to the
effectiveness of its functioning and ensure the availability of housing for the
population, and minimization of risks.
Socio-economic factors. One of the most important factors influencing any market is price for a
real estate, buying power of citizens, availability of credit, beliefs, and
norms of behaviour of the population.
The other two groups of factors affect the mortgage lending of a
particular consumer. They include: peculiarities of the consumers, their
ability and desire in satisfaction of the housing problems, degree of trust to
the sellers of housing and creditors.
Behavioral factors. The majority of the population does not hurry to become borrowers due
to distrust of the mortgage, not willing to communicate with long-term
obligations. Meanwhile the population expects a decrease in the interest rates
to the European level and considers that after a few years they will be able to
take out a credit with lower interest rates. But, as practice shows, the
housing prices are rising along with interest rates. Study of behavioral
factors allows to identify the target segments, their needs, opportunities,
satisfactions.
Personal factors also influence the purchasing behaviour. These factors could include:
occupation of borrowers, age and life-cycle stage of a family, individuality,
and lifestyle. Decision of buying a home depends largely on the family life
cycle. Most young families at the modern stage try to live separately from
their parents and therefore face the problem of acquisition of housing. Mostly
young families have a stable income and a permanent job, but at the same time
they often do not have enough money for the initial installment. Many citizens
are urged to change the housing conditions due to such stages of life, as a
second marriage, divorce, birth of children. Such indicators have greater
effects on the changes in demand on the real estate market, and consequently on
the mortgage loans. Other personal factors have an indirect influence on the
behavior of the housing market. On such factors the consumers are divided into
2 categories: with high and limited potential. The consumers of the first
category are divided into implementing (successful people who are not afraid to
take the responsibility and make a quality purchase), achieving (the people
making a career choose a prestigious goods), performing the (the people of
mature age, who value reliability and functionality) experimenting (young, most
of the revenue spend to entertainment). The consumers of the second category
are divided into trying, acting, convinced, and resisting. Only three groups of
people are ready to undertake any long-term credit for the improvement of
living conditions.
The problem of formation and development of the real estate market and
application of such form of investment in real estate as mortgage lending is
one of the actual problems of modern Russia.
This requires a combination of measures.
Firstly, you need financial mechanisms that that will allow to improve
living conditions both at the expense of savings and current earnings, and with
the help of future income of the people. Secondly, transparent legal conditions
for the development of long-term housing loans both for citizens and
developers. Mortgage should become available in order to solve the problems
with housing for citizens with average income. We need also such forms of
financing, as people's participation in shared construction, housing
accumulation programs. And this requires effective work of a bureau of credit
histories, the system of state registration of rights to real estate, mortgage
equity market.
The following steps are necessary in order to improve the availability
of mortgage loans:
- develop mechanisms which would allow the population to accumulate
initial installment which is necessary for obtaining a credit;
- create conditions for lowering the interest rates by improving risk
management.
AHML predicts that in 2013 the average interest rate will rise to 13-13,5%
per annum. According to the forecasts, the share of overdue payments will
continue to decline in the first quarter and its results will be 1,95-2,08%.
The rates of growth of the mortgage market will slow down to 20%, due to the
exhaustion of the low base effect of the previous periods, a slowdown in demand
coupled with the slowdown of the economy, increasing of interest rates on
mortgage loans and the rising cost of housing.
In 2012, the mortgage market has experienced growth; the amount of
granted credits according to preliminary estimates reached 1 trillion rubles
and broke all the records, even those that were before the crisis. Increase in
the number of mortgage deals did not prevent even the growth of interest rates,
which began in August-September in response to the situation on the Russian and
global financial markets and rising of the refinancing rate. There appeared new
programs on the market, and developed existing products and relations with
partners-developers and real estate brokers. Banks tried to guess the needs of
borrowers and meet them, for example, developing programs of new buildings, as
well as reduced their requirements to borrowers. A number of banks have joint
programs with developers, through which it can be even cheaper to buy an apartment
in a new building than on the secondary market. As a rule, it is connected with
the fact that bank lends the developer and is interested in the successful
completion of a developer project, so in most cases mortgage of new buildings
is expensive by 0.5-1.5 percent points depending on a bank. And only after the
completion of construction and registration of ownership and loan of the
constructed real estate, the interest rate decreases to values existing on the
secondary market. And loan of “secondary” flat will make the rate lower, as its
liquidity is generally high. It is more difficult to sell suburban house, as
well as the constructing new building. And loan of “secondary” flat will make
the rate lower, as its liquidity is generally high.
Thus, mortgage has prospects in Russia. Solving of this problem requires
participation of banks, and it being known that mortgage is a source for a
credit organization to obtain profit, and the way to solve one of the main
social problems of the population. Currently there is a competition between the
banks, which could lead to the emergence of new mortgage programs and reduce
interest rates, though in small.
Literature:
1. Abbasov T.O. Mortgage housing lending: the concept and place in the
system of financial law, Banking law. 2011 ¹4 - p. 58-63
2. Kazakova E.B. Opportunities and prospects of Russian mortgage lending
// Russian justice. 2011 ¹2 - p. 57-59