Mortgage lending in the world of Russian capitalism is a tool for robbing the people. None of the presidential decrees that set targets for mortgage interest rates have been met.
Mortgage: a short historical excursion
Mortgage lending has been around for a long time. A mortgage is understood as lending secured by real estate. In ancient Babylon, ancient Egypt and ancient Rome, lending was carried out almost exclusively against the security of land. The term "mortgage" (from ancient Greek. Ὑποθήκη) first appeared in Greece at the beginning of the 6th century. BC e. The ancient Greeks thus designated the form of the debtor's liability to the creditor with his land. On the border of the borrower's land plot, a post was placed with an inscription stating that this land provides debt. Such a pillar was called "mortgage" (translated as "foundation", "pledge", "warning").
Today, mortgage in most cases is a loan for the purchase of housing (houses, apartments) by people on the security of this very housing. This type of loan is called home mortgage loans (HMLs). Such lending, according to experts in the history of banking, was invented in England in the last decades of the 19th century. The money-lenders of the City of London at that time already experienced difficulties in increasing their lending operations, which were traditionally focused on private business. Lending to individuals was limited due to insufficient effective demand from the population and a lack of reliable collateral.
As for the housing problem in England in the 19th century, it was solved mainly in two ways: wealthy citizens built or bought real estate with their own money, which became their property; underprivileged people (and there were a majority of them, especially in cities) rented housing from wealthy homeowners, they were users, not owners. There were also the poorest Englishmen who lived in shelters (this is colorfully described by Charles Dickens).
Banks began to offer citizens of moderate security (that is, who had a job) loans to purchase their own roof over their heads on the security of this very roof. Moneylenders began to seduce people so that they can become full-fledged owners of real estate and feel like owners. This is how a new type of banking operations was born - the issuance of HMLs. The banks of the City of London rubbed their hands with pleasure. Gradually, this type of lending has become popular in other Western countries.
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A roof over your head or an enrichment facility?
But back to today's Russia. In various government documents, in the speeches and statements of officials at various levels, the topic of housing mortgages occupies an important place. Moreover, it is always presented as social. They say that the mortgage is a "magic wand" designed to finally and irrevocably solve the housing issue, which, in the words of Mikhail Bulgakov, tortured and spoiled the Russian people. So far, unfortunately, it persists and continues to torment many of our contemporaries. The number of families registered as in need of better housing conditions in 2011 in relation to the total number of families (including single individuals) was 5.1%. And in 2017, this figure decreased slightly, but not very significantly - to 4.4%.
In absolute terms, the number of registered needy families decreased from 2.8 million to 2.5 million families. And this despite the fact that the conditions for getting into this list are very tough. Plus, we must bear in mind that we have a whole army of homeless people, the number of which, according to various estimates, ranges from 1.5 to 3 million. Most of them do not even try to register and get into the indicated lists. In general, housing (or rather, the lack of it) is indeed the most acute social problem in Russia. Which becomes especially acute and painful against the background of the palaces of the Russian nouveau riche.
But it seems to me that the authorities were puzzled by the mortgage problem for another reason, and the social side is just a cover. Capitalism has been established in our country since the beginning of the 90s. And if this is so, then the government must first of all serve the interests of those who are the personification of capitalism and its core - the bankers. Capitalism is a society where language is littered with euphemisms - false and sly words. The Constitution of the Russian Federation is filled with such euphemisms. In particular, it says that the Russian Federation is a welfare state. No, in fact it is bourgeois. And if so, then it should express the interests of the bourgeoisie, and above all usury (here we are dealing with another euphemism: the usurers were renamed "bankers"). So, the mortgage is needed by the banker-lenders.
Folk wisdom about mortgages
Folk wisdom was able to accurately express the essence of the mortgage with the help of anecdotes and "black humor". In Soviet times, jokes from the series “Question to Armenian radio” were popular. Here is the continuation of this series in relation to our theme:
If we clear all descriptions of mortgages from euphemisms, then there are only a few words that explain the essence of this phenomenon. One of them is “robbery”. Here are some examples of folk art that reveal the predatory nature of mortgages:
- If a bill of 5,000 rubles is folded in half, then its area will exactly coincide with the area of Moscow housing, which can be bought for 5,000 rubles.
- Why take a mortgage of 4 million and pay off for 25 years? When can you steal 4 million and serve only 7 million ?!
- The manager of the Odessa bank Naum Solomonovich still persuaded the robber to take a mortgage loan.
Mortgages: a “lifesaver” for the government?
But back to the serious wave. The Russian authorities have one more reason to impose mortgages in the country in every possible way. As the scale of mortgage lending increases, it becomes one of the drivers of the economy. After all, with the rate of economic growth, the government is just full of seams. In 2015, GDP fell by 2.5%. In the next, 2016, the GDP fell by another 0.2%. In 2017, there was an increase of 1.5% (which is still significantly lower than the global average). Finally, in 2018, an increase was expected somewhere in the region of 1.5 to 1.9%. And here's a surprise! Rosstat at the beginning of this year reported that GDP growth was 2.3%.
It turned out that such an unexpected success (still modest against the background of the world average) was achieved thanks to the construction sector of the Russian economy. There was activity there, which, as it turned out, was fueled by the growth of mortgage lending (over the past year, the volume of new HMLs exceeded 1 trillion rubles, the number of loans issued amounted to 1.47 million; these are record figures for the entire existence of the Russian Federation). Last year, for the first time, more housing was built with the help of HMLs than with the help of other financing methods.
With this in mind, it can be assumed that the topic of mortgage lending will become even more important for the government. After all, at least for decency, he needs to have economic growth rates not lower than the world average. Prior to that, the authorities had one economic lifesaver - the export of oil and gas. Now, it seems to her, there is also a magic wand in the form of a mortgage.
But it is not difficult to understand that this lifesaver will have a very limited life due to the fact that interest rates on MHL are at a dangerously high level. In recent years, they have varied in the range from 10 to 15 percent per annum (depending on the bank, as well as on the type of mortgage: for the purchase of housing in the secondary market; for a new housing project, etc.). Obviously, rates should be reduced. Otherwise, everything will end with a rapid inflation of the "mortgage bubble" and its collapse. What is called "one step forward, two steps back" will occur. Not to mention the fact that regular mortgage crises will heat up the social and political situation in the country (each crisis - thousands or even millions of broken human destinies).
About mortgage interest rate
Mortgage rates in Russia have always been at an obscenely high level. For the sake of fairness, we admit: the authorities have spoken about the need to lower interest rates before, but somehow sluggishly, formally, just showing the public their “social concern”. And the bankers simply did not react to these mantras. If interest rates on mortgages fluctuated up and down, then under the influence of some more serious factors than the lamentations of the authorities.
Take, for example, one of the presidential decrees in May 2012 - "On measures to provide citizens of the Russian Federation with affordable and comfortable housing and improve the quality of housing and communal services" (No. 600 dated May 7, 2012). The first paragraph of this decree sets the following task [until 2018]: “to reduce the excess of the average interest rate on a mortgage loan (in rubles) in relation to the consumer price index to no more than 2.2 percentage points”.
It's already 2019 on the calendar. Let's try to assess the implementation of this paragraph of decree No. 600. In 2018, the interest rate on MHL ranged between 10.5 and 14.0%. Rosstat reported that the consumer price index last year was 4.3%. Therefore, the maximum rate on mortgage loans last year, according to the 2012 decree, should have been: 4.3 + 2.2 = 6.5%. But in reality it was twice as high.
Decree No. 600 on paragraph 1 has been completely failed. But for some reason, no one "above" conducted "debriefing" and did not find out the reasons and culprits of the failure. Or maybe they are not the culprits of the failure? Maybe the decree # 600 was written not in order to execute it, but only in order to demonstrate “social concern”? And we, naive, are waiting for the decrees to be executed.
Who controls the mortgage interest rate?
Let's fast forward from 2012 to closer to our time. For example, in early October last year, federal channels showed a meeting between Russian President Vladimir Putin and the head of Sberbank German Gref. The issue of mortgage lending is touched upon, the banker promised the president to lower the mortgage rate. But literally in the same month, Sberbank raises mortgage rates. Explanation: prices in the housing market are falling, developers are struggling to sell square meters, bank risks are growing, and, according to the canons of financial science, they are compensated by an increase in interest rates.
And here is the event of this year. On March 14, at the congress of the Russian Union of Industrialists and Entrepreneurs (RSPP), Vladimir Putin ordered to reduce the mortgage rate. Specifically, up to 8 percent by 2024. But didn't the May 2012 decree set a similar task that had to be completed “yesterday”? Is the Russian Union of Industrialists and Entrepreneurs responsible for the mortgage rate? Does this union of entrepreneurs have real levers to control the rate?
Any banker will tell you that for him neither the May or any other presidential decrees are not a decree at all. And even more so, oral appeals cannot serve as such. The main imperative that determines the interest rate on any loan, including mortgage loans, is the key rate of the Central Bank of the Russian Federation. At the time of the signing of the May presidential decrees in 2012, it was 8.0%. Today it is 7.75%. If the government really wanted to improve the conditions for mortgage lending, then it should instruct the Bank of Russia to reduce the key rate to the level at which mortgage loans would be available to citizens and safe for both these citizens and the entire economy of the country. But the president cannot write such a decree for the reasonthat the Bank of Russia, in violation of the Constitution of the Russian Federation, proclaimed "independence" from the state. And it seems that the President of the Russian Federation agrees with this. Therefore, decrees are written "for the village of grandfather."
The government understands that it does not manage the mortgage process in the country. In the current situation, only the Bank of Russia can really manage it. True, neither the law on the Central Bank, nor the regulatory documents of the Bank of Russia say anything about the fact that the Bank of Russia should deal with mortgages (and even more so solving the housing problem in the country). The Bank of Russia has "more serious" tasks - "inflation targeting" (the Central Bank invented this task for itself in violation of Article 75 of the Constitution of the Russian Federation). And for this, if necessary, the Bank can easily raise the key rate, provoking a mortgage crisis in the country and turning hundreds of thousands of people into homeless people.
Wolves will not feed on grass
The Minister of Construction and Housing and Utilities, Vladimir Yakushev, recently announced that in order to maintain the mortgage market and prevent a crisis, loan rates should be close to 5%. Well, that's hard to argue with. But the minister's statement should be classified as "good wishes." Another proposal, voiced by the minister, was that the rate cut should be provided by subsidizing mortgages … from the profits of the banks themselves. It is difficult to call this even a utopian consciousness. This is a complete misunderstanding of how the mortgage world works. It's like telling wolves to stop eating sheep and eat grass. Let me remind you that last year the profit of Russian banks amounted to 1.3 trillion rubles. - a record figure for the last seven years. Of this amount, 800 billion rubles. accounts for the Savings Bank. In the first two months of this year, the banks' profit amounted to 445 billion rubles.
And it's no secret to anyone that such a financial result was largely achieved due to the boom in mortgage loans (by the way, more than half of all mortgage loans have recently been issued by Sberbank). The minister cannot understand in any way that for banks the goal is money, and housing construction is nothing more than a means. Bankers very much count on the continuation of the mortgage boom this year and dream of making a profit of 1.8-1.9 trillion rubles thanks to it. If the forecast is confirmed, then it will be a record financial result of banks, achieved due to a record robbery of the people.
Author: Katasonov Valentin