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Bank of Russia sees growing mortgage risks

The tranche-based mortgage has not been widespread on the Russian market so far but developers bear the main risk of it because of slower filling of the escrow account

MOSCOW, December 1. /TASS/. The Bank of Russia notes growing risks of mortgage lending amid the rise in prices and the poor housing demand, the regulator said in its Financial Stability Review.

"Mortgage lending risks are growing: new risky practices (subsidized mortgage from developer, tranche-based mortgage and mortgage without initial contribution) are becoming widespread due to the poor housing demand; the share of loans with the low initial contribution is growing. To limit these risks, the Bank of Russia plans to increase provisions for mortgage loans having the efficient interest rate much lower than the market level," the regulator said.

The tranche-based mortgage has not been widespread on the Russian market so far but developers bear the main risk of it because of slower filling of the escrow account. The Central Bank assumes macroprudential regulation may be toughened in case such schemes become widespread, the regulator noted.