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Medvedev to hold meeting on economy sustainable development

February 02, 2015, 1:58 UTC+3 MOSCOW
The meeting will focus, in particular, on measures to support the mortgage housing loan market and issues of placement of the National Welfare Fund (NWF) money
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© Alexey Nikolskiy/The Russian presidential press service/TASS

MOSCOW, February 2. /TASS/. Russian Prime Minister Dmitry Medvedev will hold a meeting on Monday on sustainable economic development and social stability. The government’s press service reported that the meeting will focus, in particular, on measures to support the mortgage housing loan market and issues of placement of the National Welfare Fund (NWF) money.

First Deputy Prime Minister Igor Shuvalov said Friday at the State Duma lower house of parliament that the government intends to work out measures to stabilise the mortgage market, including through the Housing Mortgage Lending Agency (HMLA) mechanism. "We have a special reserve within the HMLA framework. We don’t want to let people down," he said.

He head of the Central Bank of Russia (CBR) Elvira Nabiullina for her part said at the State Duma that the Central Bank created the conditions for banks to restructure foreign currency mortgage loans, but it is also ready to introduce new measures if necessary. According to the CBR head, already now it is 1.5 times more expensive for the banks to issue currency mortgage loans than rouble mortgage loans. The Bank of Russia is ready to increase this ratio, finally making such loans prohibitive.

After CBR raised the key interest rate on December 16 to 17% per annum, the banks began to increase mortgage rates. According to HMLA, if in the first half of 2014, the average interest rate on mortgage loans was 12.2-12.3%, then by the end of the year it increased dramatically and recently was kept at no less than 15% in the major banks. Many banks have offered mortgage loans at 18 and even 20% annual interest.

To solve the problem of foreign currency borrowers, CBR also offered banks to use the official exchange rate of foreign currencies against the rouble as of October 1, 2014 /39.4 roubles per dollar and 49.98 roubles per euro/ when converting the foreign currency mortgage loans. This is 1.6 times lower than the current dollar rate and 1.4 times lower than the current euro rate. It has been proposed to use this rate for the conversion of not only of the principal amount of the loan, but also of the amount of fines and penalties. The Central Bank says interest rates on restructured loans must be commensurate with the rouble housing loans.

HMLA in 2015 pledged to focus on refinancing loans within the social standard at a reduced interest rate below 13% All citizens who buy apartments under the programme "Housing for the Russian family" will be able to take advantage of this offer. In addition, HMLA sees the development of mortgage loan refinancing programme, similar to that used by the Bank of Russia for military mortgage, as one of the measures to support the mortgage market.

According to the AHML analytical centre, Russia’s mortgage market in 2014 grew by nearly 25% and reached a peak - about a million mortgage loans worth some 1.7 trillion roubles ($24.40 billion) were issued.

As for the National Welfare Fund, according to Deputy Prime Minister Arkady Dvorkovich, the Russian president has given instructions to analyse the feasibility of funding the already announced projects from this fund. "NWF, as one of the government’s reserve sources, should certainly be used with maximum carefulness," said Dvorkovich. "We are currently conducting such an analysis, as the delay in the implementation of that or other projects also depends on the possibilities and presence of investors. NWF projects should be payable by default, even in the long term, and irrevocable financing is ruled out," said the deputy prime minister.

According to him, the presence of an investor in a good financial condition is the necessary precondition for the start of funding from the NWF.

The meeting with the prime minister will be attended by Igor Shuvalov, Arkady Dvorkovich, presidential aide Andrei Belousov, Finance Minister Anton Siluanov, Economic Development Minister Aleksei Ulyukayev, Central Bank head Elvira Nabiullina and others.

On Sunday, Shuvalov also said on the Rossiya 1 TV channel that on Monday the government would take final decisions on the financing of the anti-crisis plan, which was adopted on January 28. On Friday, January 30, the Cabinet of Ministers presented the plan to the State Duma lower house of parliament. The amount of funding for a number of measures has not yet been determined in the plan.

"On Monday we are going to hold a special meeting, the relevant materials have been submitted to the government, and the final decision on the amount of funding to be allocated for these measures will be taken on Monday," Shuvalov said.

The first deputy prime minister said the government has 166 billion roubles ($2.383 billion) for the implementation of measures envisaged in the plan. If additional funds are needed, they can be found through the reallocation within government programmes, Shuvalov said.

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