NCFU expert: Central Bank restrictions for “trench” mortgage will reduce risks, but will hit the affordability of housing

The Central Bank is preparing restrictions for mortgage programs with delayed payment growth. The consequences were told by Doctor of Economic Sciences, Professor of the Department of Finance and Credit of NCFU Victoria Mitrokhina. This was reported in the press service of the university.

The regulator plans to reduce the grace period to three years and oblige banks to form increased reserves for such loans. Under the new conditions, it will be unprofitable for credit institutions to work with such programs.

We are talking about a “trench” mortgage with differentiated payments, when in the first years the contribution is artificially underestimated at the expense of the developer or special conditions of the bank.

Such a mortgage creates the illusion of affordability: the borrower relies on strength based on a low first payment, but may not be ready for a sharp jump in the load. In addition, “low payment” is often laid in the final cost of the apartment, and the buyer overpays, — said the expert.

Risks for banks

According to Mitrokhina, the main threat is the growth of non-payments: at the end of the grace period, the likelihood of defaults increases. Limitation of the grace period and increased reserves are classic macro-regulation tools.

“When a bank is obliged to put more money in reserves for risky loans, it freezes capital that could be profitable,” she explained.

Banks will have to immobilize liquidity “in reserve”, operating assets will be reduced, and due to the fall in margins, they will practically abandon partner schemes with developers, where payment in the first three years grows by more than 20%. In the long run, this will protect their balance sheets from hidden bad debts.

What will change for borrowers

For borrowers, restrictions will result in a decrease in availability at the start: the opportunity to wait out the first years of construction with a low payment, combining a mortgage with housing rentals, will disappear.

According to the expert, you will have to pay immediately at the full market rate.

Pros are expected: developers will not be able to lay the “commission to the bank” in the body of the loan, the artificial markup for housing, which reached 20-30%, will disappear. Citizens will be protected from the “cash gap”, when in 1-3 years the payment grew sharply, Mitrokhina explained.

Implications for developers

The most tangible consequences will be for developers. If earlier such schemes occupied up to 20-30% of all issuances in the market of new buildings, their disappearance will noticeably “cool” demand. Developers will have to develop other tools to attract buyers.

“In order to maintain the pace of sales and the occupancy of escrow accounts, developers will have to reduce prices or agree to a lower profit: simply “lay” a subsidy in the cost of the apartment will no longer work,” the expert concluded.

The new rules are due to come into force on July 1, 2027, the bill will be released in early 2027, so the market has time to adapt.