What is the power to take: Russians took out loans for almost 35 trillion rubles

 Why the loan portfolio grew at a record level in 2023 and whether risks emerged for citizens and the banking system.

Russians have increased their debts to a record level. Over 10 months, the total loan portfolio of citizens increased by 6 trillion - to 34.8 trillion rubles by November 1. This follows from the statistics of the Central Bank, which were analyzed by Izvestia. The increase in 2023 turned out to be the maximum in history, the regulator confirmed. The reasons are pent-up demand against the backdrop of economic stabilization and low rates at the beginning of 2023. The tightening of conditions for preferential mortgages also had an impact: clients tried to quickly obtain a loan with favorable parameters. There are risks of Russians being overburdened with debt. However, the market has already begun to cool after the key increase.

How many loans did Russians get in 2023?

The total volume of household loans reached a maximum of 34.8 trillion rubles at the beginning of November, according to Central Bank statistics. This year, Russians have increased their debts to a record level. Over the 10 months of 2023, the total loan portfolio of citizens increased by 6 trillion rubles.

The increase was the largest for the entire period of statistics (at least since 2015), and by a significant margin. Thus, in January-October 2022, the total volume of loans increased by 1.7 trillion rubles. Over the same period in 2021 there was an increase of 4.1 trillion rubles, and over the 10 months of 2020 – by 2.2 trillion rubles.

The volume of household loans for 10 months of this year actually grew at a record level, the press service of the Central Bank confirmed. They added: about 60% were mortgages, which were supported by preferential programs.

We also actively processed unsecured loans. The growth in their issuances was six times higher compared to 2022, the Bank of Russia clarified. But this is due to the weak dynamics of last year. At that time, Russians cautiously planned large purchases in conditions of uncertainty, and banks significantly tightened their credit policies, the regulator emphasized.

They explained: the reasons for the record growth in household loans this year are pent-up demand amid the stabilization of the economic situation, as well as an increase in household incomes.

Another explanation is low rates, said Sovcombank chief analyst Anna Zemlyanova. Until July 2023, the key rate remained at 7.5% per annum. Record mortgage issuance also had an impact. Clients could additionally take out a cash loan to secure a down payment or for upcoming renovations and the purchase of furniture and equipment, explained Anna Zemlyanova.

An additional factor is high inflation expectations, says Dmitry Gritskevich, manager for analysis of banking and financial markets at PSB. People were afraid that everything would only become more expensive in the future, so they rushed to buy goods at the current price.

He added: the increase in the key rate to 16% and the tightening of conditions for preferential mortgage programs also made their contribution - citizens sought to get a loan at a more favorable interest rate.

The rate on preferential mortgages this year increased to 8%, the limits changed, and the square meters themselves became more expensive, recalled Freedom Finance Global analyst Vladimir Chernov. In addition, an increase in the minimum down payment to 30% was announced in advance, so citizens tried to quickly take out a housing loan on the same terms.

Risks of debt exposure for Russians

Despite the increase in the credit burden of the population, its level is not yet critical for the stability of the system, says Mikhail Polukhin, director of the ACRA group of financial institution ratings.

Basically, banks issued secured loans, for example, secured by real estate, noted Vladimir Chernov. If the borrower goes bankrupt, the financial institution will receive the apartment and will be able to sell it on the real estate market to cover its expenses. Due to this, the risks for the Russian banking system have not increased, the expert believes.

However, cash loans have increased. If they are taken by people with a high debt burden, this increases the risk of debt exposure for the population, emphasized Anna Zemlyanova from Sovcombank.

She added: on average, in the third quarter of 2023, the ratio of debt to income of citizens reached 36%, although in the first quarter it was 33%. Over the past 10 years, the indicator has been at this level only once - at the end of 2021.

Against the backdrop of high debt levels and people’s transition to a savings model of behavior, household expenses may decrease. And this will further lead to a slowdown in economic growth, warned Vladimir Chernov. At the same time, a high key rate will put additional pressure on the rate of GDP growth.

Nevertheless, the level of debt among Russians is now still significantly lower than the population in developed countries, said Anna Zemlyanova from Sovcombank. For example, in the United States, following the results of the third quarter, the ratio of citizens' debts to their income was 84%.

How the conditions for issuing loans in the Russian Federation have been tightened

The Central Bank reported that the quality of loans issued, including under preferential mortgage programs, is low, which threatens the accumulation of credit risks in the future, recalled Dmitry Gritskevich from PSB. Therefore, the regulator significantly tightened macroprudential limits on consumer loans, that is, it limited the ability to issue loans to clients with a high debt load. He also increased the requirements for the down payment on a mortgage from June to 20% (and under the preferential program for new buildings in December - up to 30%).

The Central Bank noted the effectiveness of these measures. The quality of new consumer loans is improving. However, almost 60% of all loans are still issued to people who allocate more than half of their income to repay loans, the press service of the Bank of Russia said.

They added: the share of mortgages with a low down payment is also declining. However, the volume of issuances, on the contrary, continues to grow, which is cause for concern. The measures already introduced are still sufficient to improve the situation, says Dmitry Gritskevich from the PSB.

In October-November, the Central Bank already recorded signs of a cooling in retail lending. The trend was confirmed by market participants.

In general, over the 11 months of 2023, the Crimean RNKB issued 1.5 times more loans in volume and 10% more in quantity than during the same period last year, its press service shared. However, against the backdrop of an increase in the key rate and the introduction of other restrictions, a slowdown in growth was noted. A decrease in lending rates in the fourth quarter was also recorded at Zenit Bank . This trend will continue in the first months of 2024, says Alexander Shornikov, director of the organization’s retail risk department.

At the end of next year, the increase in mortgages in the banking market could be 10-12%, while in 2023 it will be about 30%, estimated Dmitry Gritskevich from PSB. The driver of growth in 2024 will remain mortgages, and to a large extent, preferential programs, expects the founder of Anderida Financial Group, Alexey Tarapovsky. The volume of such loans in the next five to six months will be high due to rush demand and the desire of citizens to “jump on the last train” of government programs, agreed Vladimir Chernov from Freedom Finance Global. They are valid until July 1, 2024, and it is not yet clear whether they will be extended.