Parents welcoming a new family member could receive up to 18 months of mortgage holidays.
In Russia, mortgage holders expecting or having a new child might soon be eligible for mortgage payment holidays lasting up to eighteen months. These proposed amendments have been submitted to and approved by the government`s legislative activity commission. The initiative aims to alleviate the financial burden of mortgage payments for Russian families with children and simultaneously support demographic growth. Experts have weighed in on the potential benefits and drawbacks of this new measure.
Under the proposed changes, families with one child experiencing a 20% or greater drop in income, where mortgage payments exceed 40% of their monthly earnings, could qualify for up to six months of credit holidays. For Russian citizens who have a second child or subsequent children (biological or adopted), they can apply to banks or microfinance organizations for a payment deferral of up to 18 months, or until the child reaches one and a half years of age. It`s important to note that during these holidays, preferential interest rates will apply only for the first six months; full interest accrual will resume from the seventh month of the deferral.
Currently, there are no precise estimates on how many Russian families with children will utilize these mortgage holidays. Vadym Butin, Head of Mortgage Lending at Glavstroy-Nedvizhimost, suggests that «if we look at family mortgage statistics, potentially tens of thousands of families could utilize this measure annually, especially in regions with high birth rates and active state support for housing purchases.»
Many experts believe this initiative aims to improve demographics, effectively categorizing the birth or adoption of a child as grounds for mortgage holidays. David Bezlyudov, Head of Marketing Analytics at Asterus, commented that the adoption of these legislative amendments could encourage those who previously hesitated to take out a mortgage due to various concerns, including anticipated family expansion requiring significant short-term expenses.
However, some analysts caution that this measure is more a step towards supporting families with children rather than a full-fledged benefit, as the initiative comes with significant caveats. Butin emphasized, «It`s crucial to understand that this is not debt cancellation, but a deferral. Interest continues to accrue during the mortgage holidays, and payments are simply postponed. Consequently, the total amount paid over the loan term will increase. Therefore, borrowers must assess in advance whether such a deferral will be genuine assistance or, conversely, lead to an added burden in the future.»
A key unanswered question is how authorities plan to compensate commercial banks, which are profit-oriented, for potential losses. Polina Gusyatnikova, Senior Managing Partner at PG Partners law firm, explained, «If concessions are given to some, it comes at the expense of others. Essentially, the bill implies this will be at the banks` expense, but banks also need to source these funds. This could lead to worse terms on other products, such as loans and deposits.» Moreover, for many banks, such a law could become a deterrent for approving loans to families expecting new additions. According to Bezlyudov, their status and potential for deferral might be perceived as indicators of low solvency for prospective borrowers.
It should also be noted that information about granted mortgage holidays is recorded in credit bureaus and may appear as either a late payment or a deferral. Maria Avrova, Head of Mortgage Lending at Est-a-Tet, warned that «this could potentially reduce a borrower`s chances of approval for subsequent credit products.» All these factors contribute to skepticism among legal experts regarding the primary goal of the bill. Alla Georgieva, a civil law attorney, believes that «overall, the demographic situation will not fundamentally change; families will not increase birth rates solely for the sake of obtaining mortgage payment deferrals.»
