Support The Moscow Times!

Cheap Mortgage Credit on Offer in St. Pete

Banks in St. Petersburg and the Krasnodar region are offering mortgage crediting at well below the market rate. Vladimir Filonov

Bank Saint Petersburg fulfilled the mission set for it by its shareholder Prime Minister Vladimir Putin to offer a mortgage with a rate of 6 percent, but the new offer has few advantages over conventional mortgages.

"If we can hold down inflation, it will lower rates on mortgages to somewhere around 6.5 percent in the coming years," Putin said Wednesday in the Duma. Previously, he told bankers to aim at bringing the rate down to 6 percent.

The first bank to figure out how to achieve that was Sberbank. In October 2011, it began to accept deposits on a special mortgage at 1 percent to 2 percent annually in rubles for one to 6 years in the Krasnodar region. After the expiration of that loan, the depositor may qualify for a mortgage loan of up to 1.5 million rubles ($50,000) at 6 percent to 8 percent per annum. That rate is made possible because of contributions and grants from the regional administration.

Late last week, Bank Saint Petersburg, in which Putin owns 230 shares, also announced a mortgage offer at 6 percent.

The bank is implementing the program in conjunction with a developer from Setl Group, which is its client. The low mortgage rate applies to the purchase of apartments under construction in four complexes.

"We have worked with Setl Group for many years, some of the proposed sites for this program are being built with bank credits," said Marina Gorilovskaya, the retail business director at Bank St. Petersburg.

The minimum 6 percent rate applies to credits with a 50 percent down payment, for up to seven years after the apartment is registered in the borrower's name. The maximum rate of 12.5 percent applies to down payments of 15 percent for 15 to 25 years. The maximum loan amount is 12 million rubles. There is no commission.

Market rates for similar loans are much higher. At Sberbank it is 12.25 percent annually and VTB 24 offers 9.9 percent to 13.25 percent. The banks partnering with the Housing Crediting Mortgage Agency offer 7.9 percent to 9.4 percent.

VTB 24 vice president Georgy Ter-Aristokesyants suggested that the developer might compensate the bank the difference between the market interest rate to increase sales. "That's common in these affiliate programs," he said.

Now, a third of borrowers are willing to pay half the cost of an apartment with their own funds, Gorilovskaya estimated. It is expected that the demand for this program will be 150 to 170 applications per month. In March, the bank issued 150 loans.

Comparing loans, it turns out that, with a purchase price of 5 million rubles, a borrower with funds of 2.5 million rubles and a rate of 6 percent annually will pay 36,521 rubles monthly over seven years, and a borrower with 2.125 million rubles and a rate of 10.5 percent will pay 35,830 rubles a month over the same period, a mortgage marketing calculated at Vedomosti's request.

Sign up for our free weekly newsletter

Our weekly newsletter contains a hand-picked selection of news, features, analysiss and more from The Moscow Times. You will receive it in your mailbox every Friday. Never miss the latest news from Russia. Preview
Subscribers agree to the Privacy Policy

A Message from The Moscow Times:

Dear readers,

We are facing unprecedented challenges. Russia's Prosecutor General's Office has designated The Moscow Times as an "undesirable" organization, criminalizing our work and putting our staff at risk of prosecution. This follows our earlier unjust labeling as a "foreign agent."

These actions are direct attempts to silence independent journalism in Russia. The authorities claim our work "discredits the decisions of the Russian leadership." We see things differently: we strive to provide accurate, unbiased reporting on Russia.

We, the journalists of The Moscow Times, refuse to be silenced. But to continue our work, we need your help.

Your support, no matter how small, makes a world of difference. If you can, please support us monthly starting from just $2. It's quick to set up, and every contribution makes a significant impact.

By supporting The Moscow Times, you're defending open, independent journalism in the face of repression. Thank you for standing with us.

Once
Monthly
Annual
Continue
paiment methods
Not ready to support today?
Remind me later.

Read more