The 33,000 foreign currency mortgage loans represent 0.17% of the total 19.75 million mortgages issued since 2012
Russians who took out mortgages in foreign currencies have been in the news quite a bit recently. The Associated Press, RFE/RL, the Telegraph, the Moscow Times (among others) have all had stories about protesters demanding the restructuring of loans that, in the wake of the ruble’s devaluation, have become ruinously expensive.
On the one hand, these protesters clearly have a good reason to be angry. Unless there’s a rapid and totally unexpected recovery in the ruble, or unless the people who took out the loans are somehow being paid in dollars, their loans have become about twice as expensive in ruble terms. Paying back a loan is never a lot of fun, and it’s certainly a lot less fun when the finish line keeps getting further and further away. So all sympathy goes out to those unfortunate souls who borrowed in dollars but earn in rubles: there’s just no way to sugarcoat how terrible that is.
But how representative is this subset of mortgage borrowers? How large of a group is it? Is this the potential start of a protest movement that could cause major trouble for the government?
First, some idea about scale. Since the beginning of 2012, about 19.75 million total mortgages have been issued in Russia. The overwhelming majority of these loans have been ruble-denominated. Foreign currency is a very small subset of the total: roughly 33,000 (or 0.17% of the total) have been denominated in foreign currency over the pat four years. For comparison’s sake, just in December 2015 Russian banks extended roughly 600,000 new ruble-denominated mortgages.
The Central Bank dataset gets a little bit patchy the further back you go (in the grand scheme of things, the mortgage industry is a relatively recent innovation) and there is some clear evidence that, in the past, foreign currency mortgages played a much larger role than they do today. Back in early 2012, foreign currency mortgages accounted for as much as 11% of all outstanding loans. That’s not an overwhelming percentage (both Poland and Hungary were much more enthusiastic in their embrace of such mortgages) but it is significant.
That share, however, has rapidly plummeted over the past few years, as forex lending has all but come to a halt (in all of 2015, a mere 1,600 new loans were issued) and ruble-denominated lending continued, albeit at a greatly reduced pace in 2015.
If anything was going to cause the government to start a large-scale (and likely extremely expensive) refinancing program it would be if the market for ruble-denominated mortgages was crashing. But while delinquencies are increasing, which absent a change will become a problem sooner or later, they’re not yet at a level that seems likely to cause a crisis. In fact, as a percentage of all loans outstanding, delinquencies are still significantly below their 2012 level:
The Kremlin isn’t immune from the laws of financial and economic gravity, but, without minimizing the very real pain experienced by borrowers, foreign currency mortgages just don’t seem to present a large-scale problem.