Translated material
Following the Central Bank
AHML reduces the base rate for refinancing standard loans
The Agency for Housing Mortgage Lending (AHML) has reduced the base interest rate for refinancing standard mortgages from 11.05 to 10.8%. The agency decided to adjust its policy after the recent reduction of the Central Bank refinancing rate by a similar amount. AHML expects that the reduction in the cost of funds will allow market participants to issue mortgage loans at lower rates. In the current realities, this is unlikely, bankers argue: now the key factor influencing the cost of a loan is risks, and not the AHML rate.Now the rates for refinancing mortgage loans in AHML if the borrower has personal insurance fluctuate in the range of 10.8-12.76% per annum, in the absence of insurance - 11.5-13.46% per annum. The rate adjustment was caused by the recent decision of the Central Bank to reduce the refinancing rate (the regulator also reduced the cost of borrowed funds by 0.25%), AHML notes. “Since December 2008, the base refinancing rate for standard loans has been calculated taking into account the refinancing rate of the Bank of Russia. Thus, since December, our rate has changed five times downwards,” recalls Elena Silenko, head of the public relations department of AHML. According to her, during this time the cost of borrowed funds in AHML fell by 2.25% (from 13.05%). “Rate values have returned to the pre-crisis level of 2007, which creates more comfortable conditions for mortgage lending and increases the availability of mortgages in the current conditions,” the agency notes. “We expect our partners to reduce mortgage rates.”
However, market participants issuing mortgage loans according to AHML standards are not yet in a hurry to adjust their lending policies following the agency. Before the crisis, large players could securitize their mortgage portfolios by issuing bonds secured by mortgages, and it was the securitization rates that influenced loan conditions, bankers note. In the conditions of the financial crisis, the main factor determining the cost of a mortgage loan is high risks, notes Alexander Razuvaev, head of the analytical department of Gallion Capital Investment Company. And the deputy chairman of the board of the City Mortgage Bank, Ruslan Iseev, believes that due to the reduction in the refinancing rate for standard AHML mortgages, some reduction in market rates may occur, but it will be “extremely insignificant.”
Basically, AHML's decision will affect banks that operate on short-term resources and are confident in the guaranteed repurchase of their portfolios, experts say. Thus, Bank Vozrozhdenie, which refinances all newly issued mortgage loans at the agency, intends to reduce the rate on them following AHML. The bank explains its position by the agency’s abolition of the mechanism for repurchasing mortgages at an individual rate. As is known, this algorithm, which ceased to operate on July 1, implied the repurchase of mortgages by AHML at a premium if the loan was issued at a rate exceeding the agency’s main rate. “Thus, taking into account the abolition of premiums, it makes no sense for the bank to issue loans at a rate exceeding the agency’s main rate,” states Alexander Vasiliev, deputy head of the retail operations department of Vozrozhdenie Bank. “In this regard, we issue all loans today exactly at the rate established by AHML.”
Those credit institutions that do not feel confident in quickly selling a portfolio or prefer to form portfolios to “hold” for several months or years will most likely respond more slowly to the agency’s monetary policy, says Natalia Khakhalina, Deputy Director of the Retail Lending Department at Absolut Bank. “After all, the nature of funding for further placement at low rates is not obvious,” she explains.