Sberbank declares lower mortgage interest rates
Let's Get Down to Brass Tacks:
Sberbank, Russia's biggest bank, is slashing interest rates on mortgages, loans, and deposits, starting June 10 and 11, respectively. The bank's move follows the Central Bank's recent drop in the key rate to 20% on June 6, marking the first reduction in over two and a half years.
Market mortgage rates will be reduced by 2 to 3.5 percentage points, consumer loans by 2 percentage points, and deposits by 1 percentage point across all terms. Sberbank's maximum rate on savings products will be a somewhat modest 19% per annum.
Moreover, the bank anticipates another decrease in the Central Bank's key rate to 19% per annum in July, and it's projected to hit 17% by the end of 2025.
This rate cut by the Central Bank is a promising sign for the Russian stock market. Sberbank's move to lower interest rates will likely follow a similar trend, making borrowing more affordable for consumers and businesses. However, analysts warn that the next Central Bank meeting in July could be tricky.
The stock market initially surged above 2900 points following the Central Bank's decision but later fell to 2830 points. Meanwhile, VTB's head, Andrei Kostin, suggested a "bet on 10 clicks" on the Central Bank's June decision on the key rate, predicting a lower rate, while VTB's first deputy chairman, Dmitry Pyanov, expected the indicator to remain at 21%.
According to experts, reductions in the Bank of Russia's key rate can positively influence stock market performance by increasing liquidity and improving investment conditions. However, the Bank of Russia is likely to maintain a tight monetary policy for an extended period to contain inflation. This cautious approach reflects ongoing risks such as geopolitical uncertainties, a widening budget deficit, and supply-demand imbalances that could cause inflationary pressures to re-emerge.
In the short term, the stock market may experience moderate gains, but volatility could persist due to these risks. Sberbank, meanwhile, will likely lower its interest rates gradually, balancing the need to manage risks related to inflation and credit quality with the benefits of increased lending activity in an improving economy.
In summary, further Central Bank key rate reductions are expected to modestly boost the Russian stock market by improving liquidity and business conditions, while Sberbank will likely reduce its interest rates gradually, reflecting the Central Bank’s careful approach to balancing inflation control with economic support.
The bank's move to lower interest rates, including on mortgages and consumer loans, is likely to make borrowing more affordable for both consumers and businesses. The reduction in the Central Bank's key rate is a promising sign for the Russian stock market, as it can positively influence stock market performance by increasing liquidity and improving investment conditions.
