Why Russians Continue to Take Out Mortgages Despite High Interest Rates? Concerns About Devaluation and Increased Housing Demand
1. Inflation Growth and Concerns About Ruble Devaluation
One of the most significant reasons for Russians' eagerness to acquire real estate is the fear of ruble devaluation. In the context of inflationary pressure driven by sanctions, changes in global energy markets, and domestic economic challenges, the purchasing power of the ruble is unstable. In October 2024, inflation in Russia stood at 7.5%, creating a risk of significant depreciation of savings. For many, investing in real estate becomes a protective measure, as property values generally increase in line with inflation.
2. Comparison of Interest Rate Growth With Housing Price Growth
The average mortgage rate in October 2024 is 13.2% per annum, which is over 2% higher than the previous year. Meanwhile, the rate of growth in property prices in Moscow and St. Petersburg averaged 9% since the beginning of the year, with some other regions, like Krasnodar and Kazan, seeing growth of up to 12%. Therefore, if an individual plans to purchase real estate, their mortgage expenses may be justified by the long-term appreciation of the property, which compensates for interest costs.
3. The Desire to Lock in Rates for the Future
Many Russians fear further increases in interest rates, as the Central Bank of Russia maintains a high key rate to combat inflation. According to the Bank of Russia, the key rate in November 2024 stands at 10%, with expectations that it may be raised. In such conditions, borrowers are keen to secure a mortgage to lock in the current rate, fearing that future terms may become less favorable.
4. Government Support for Mortgages and Special Programs
The Russian government has implemented a number of subsidized lending programs, particularly for families with children, making mortgages accessible despite high rates. For instance, the "Family Mortgage" program allows families with children born after 2018 to obtain loans at a reduced rate starting from 6%. These programs continue to stimulate demand for housing, making mortgages more accessible for certain categories of borrowers.
5. An Alternative to Renting and Improving Living Conditions
According to a study by CIAN, the average rent for a two-room apartment in Moscow in 2024 reached 65,000 rubles per month, nearly 20% higher than the previous year. Considering that monthly mortgage payments can be comparable to or even lower than rental costs, many families opt to purchase property as a more advantageous and long-term option.
Furthermore, for families, a mortgage represents an opportunity to improve their living conditions—whether by increasing living space, relocating to a more developed area, or moving closer to work and educational institutions.
6. Investment Interest in Real Estate
For those viewing real estate as an investment, high demand for mortgages remains relevant. According to the Russian Guild of Realtors, interest in new builds among private investors rose by 22% in 2024. Real estate in Russia continues to be a popular asset, protecting capital from inflation, which particularly attracts investors during periods of unstable currency exchange rates and heightened inflation.
My Comment as the Founder of Open Oil Market
"As the founder of Open Oil Market, I see that the current economic situation is prompting Russians to increasingly seek ways to preserve and grow their assets. High interest rates do not deter those who understand that real estate is one of the most resilient assets, safeguarding capital against inflation and ruble devaluation. Investing in one’s own housing is becoming an important strategy for individuals looking to secure current conditions and minimize future risks. Amid an unpredictable economy, people are increasingly choosing housing, and mortgages remain one of the key tools for achieving this goal."
Thus, the mortgage market in Russia remains resilient despite high rates and inflation. People continue to take out mortgages due to fears of ruble devaluation, the desire to lock in rates, the availability of government support, and the aim to improve living conditions. Real estate remains not only a means of securing the future but also a reliable way to preserve capital.
This sustained dynamic in the mortgage market demonstrates that the demand for housing and the desire to shield savings from inflation significantly outweigh the risks associated with high interest rates.
