Lowered mortgage interest rates offered by VTB
A Shift in the Mortgage Landscape
Starting June 20, VTB is slashing rates on market and combined mortgages for new constructions, hinting at a revitalization in the housing market. Alexander Pohomov, the bank's Deputy President and Chairman, made this announcement at the St. Petersburg International Economic Forum (SPIEF-2025).
"We anticipate a gradual market stabilization with the key rate reduction, and we're hopping on board by conducting mortgage deals under these new, advantageous conditions," Pohomov shared. While he acknowledges state support as the primary driver of demand, accounting for over 80% of sales in the housing credit market in the first half of the year, he believes the improvements will positively influence other credit products as well.
Under the new conditions, including discounts, the market mortgage rate will range from 25.3% for purchasing apartments and apartments, to 25.9% for individual housing construction. Combo mortgage rates will start from 6.97% in combination with family support programs and from 7.03% with IT mortgages.
VTB predicts total market mortgage issuance for January-June 2025 will be around 1.5 trillion rubles. The bank anticipates a gradual normalization of the market as monetary policy loosens.
At the Bank of Russia's June 6 meeting, the key rate was reduced from 21 to 20% per annum. The Central Bank highlighted decreasing inflationary pressure and the economy's gradual return to balanced growth. Despite this, the Bank of Russia emphasized that it would maintain the same monetary and credit conditions necessary to bring inflation back to its 4% target by 2026.
While these rate reductions create hopes for slightly easier borrowing costs, mortgage rates remain high compared to pre-2024 levels, averaging around 30%. The full impact of the lowered rates on demand might be delayed, as market analysts expect a slight decline in demand through 2025.
The Russian mortgage market is undergoing changes after the termination of the large-scale subsidized mortgage program and high interest rates have slowed mortgage lending growth. The current situation is marked by decreasing new housing sales, increasing buyer use of installment plans, and persistent imbalances in the price gap between new and existing housing markets.
The Bank of Russia has flagged increased bubble risks in the primary real estate market due to past rapid price hikes, borrowing increases, and household income trends that rose until the second half of 2024. Despite these risks, the secondary market remains stable, mainly due to persistently high and unsubsidized mortgage rates.
The market is expected to remain subdued through 2025, with modest demand recovery beginning in 2026 as mortgage rates potentially fall to a more affordable range of 12–15%. This would stimulate a 5–10% increase in demand, with new build prices rising 4–5% and secondary market prices growing 4–6%. Regional market dynamics will vary, with some major cities potentially facing new build shortages and local price hikes of 5–7%.
In conclusion, the Russian mortgage market is currently in a phase of slowed lending growth following policy changes and interest rate hikes, with key shifts such as the end of subsidized mortgage programs impacting demand and sales patterns. Although recent rate cuts, including VTB's reduction, provide some relief, mortgage costs remain high, tempering borrower activity. The market remains sensitive to further monetary policy changes and government housing support measures.
"The reduction in mortgage rates by VTB, as announced by Alexander Pohomov, could potentially influence the finance aspect of the business sector, particularly the housing market, by stimulating demand for new constructions."
"The improvements in mortgage conditions, such as discounts provided by VTB, could extend to other credit products within the business realm, according to Pohomov's expectations."
