Mortgage Lending Rises

Mortgage Lending Rises

Published: April 13, 2011 (Issue # 1651)

Between January and March this year, Petersburg residents took out 2,718 mortgages — twice as many as the corresponding period in 2010, according to the St. Petersburg Mortgage Agency.

The combined value of mortgages issued almost tripled to 5.9 billion rubles ($210 million), more than in the first quarter in 2007 (when mortgages worth 5.1 billion rubles or $181.7 million were issued) but not as much as the 2008 record high for borrowing of 13.9 billion rubles ($495.2 million).

Sergei Milyutin, head of the development department of the St. Petersburg Mortgage Agency, links the growth in mortgages to an increase in the number of places where they’re being offered. According to Milyutin, last year, five or six banks offered mortgages at 10 to 15 individual branches. This year, a further 17 to 18 banks — including international banks — joined their ranks, boosting the total number of branches offering mortgages up to 30. Barclays Bank, Baltinvestbank, Absolut bank, Fininvest bank, Ak Bars and Vozrozhdenie have all reentered the market, said Milyutin. There is a backlog of buyers, and borrowing money has become easier, he added,

The average amount borrowed has increased from 1.6 million rubles ($57,000) to 2.2 million rubles ($78,000).

The appearance of new banks has blunted the leading edge previously enjoyed by other banks. During the economic crisis, Sberbank increased its share of the city’s mortgage market from 17.8 percent to 60 percent and now has a 44.3 percent share. Banks operating within the Agency for Home Mortgage Lending program have seen their share decrease from 15.4 percent to 3.3 percent.

BaltInvestbank began offering mortgages only in the second half of 2010; before then there was virtually no demand, said Igor Kirillovykh, chairman of the bank’s board of directors. Now the returns from lending money are quite satisfactory and the risks are acceptable to banks, he added.

The competition for clients is enourmous, higher than before the crisis, said Olga Dragomiretskaya, managing director at Gazprombank’s St. Petersburg branch.

A similar boom in demand hasn’t been seen for new developments, said Milyutin. Apart from the general lack of real estate development, the market is further held back by cumbersome bureaucratic procedures, said Olga Bazhutina, regional director for DeltaCredit. At VTB 24, only 15 percent of mortgage agreements are for first time buyers, which is far less than before the crisis, according to Mikhail Ioffe, manager of the bank’s St. Petersburg branch.

At Setl City, 15 percent of all agreements are loan agreements, twice as many as at the beginning of 2010, and this figure will increase to 20 percent toward the summer, said Ilya Yeremenko, the deputy managing director for Setl City. The number of mortgage agreements at LenSpetsSMU developer rose from 5 percent to 10 or 12 percent, according to Viktor Vasenev, the company’s deputy finance director. But the instalment plans offered by real estate developers that helped out buyers in 2009 are still popular — loans still cannot replace these “internal repayment plans,” as they are more beneficial to the client, said Viktor.

According to Milyutin, the APR for mortgages set in rubles is 13 percent, 1.5 percent lower than in 2010 and not as high as in 2009 when it reached 16 percent.

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