Russian home buyers theoretically face loan repayments running into hundreds of thousands of pounds, after mortgage rates in some Russian banks reached an eye-watering 43%.
Recently the Russian Central Bank hiked interest rates to a historic high of 21%, as inflation continues to rise.
As a result, high street banks have responded by raising interest payments on mortgages and loans, as they adjust to the new economic realities.
The maximum level mortgage rate at several banks has now gone over 30 percent, in a move that is likely to have shattering consequences for Russia‘s property market.
Sovcombank now offers mortgages with a maximum interest rate of 43%, while VTB offers loans at 37.1% and Sberbank at 31.3%.
According to the Russian publication RBK, a twenty-year mortgage at 43% on an apartment worth £95,472 will mean repayments totalling a whopping £752,452.
The average price per square metre of a flat outside Moscow is £1,773, meaning for £95,472 a buyer would get a 53 square metre apartment.
Russian homebuyers have been helped by a generous government mortgage subsidy introduced in 2020 and extended after the imposition of Western sanctions following Putin’s full-scale invasion of Ukraine.
Under the scheme, mortgage rates were fixed at 8% which helped drive a property market boom.
However, the surge in house sales led to a spike in inflation, which reached 9.1% in July.
As a result, the government ended the subsidies, which has already caused a significant upheaval in the housing market.
Rental prices are also soaring, creating a “perfect storm” for housing affordability. Housing subsidies for families with more than three children are still available.
The initiative is designed to encourage families to have more children, as the Kremlin continues to grapple with a demographic crisis.
The hike in interest rates has provoked a furious political backlash, with a prominent Russian MP calling for the removal of the head of the Central Bank and close Putin ally.
Sergei Mironov, the leader of the party “A Just Russia – For Truth” demanded the resignation of Elvira Nabiullina.
He pointed out that Russian interest rates of 21% were now on a par with those in Angola and Zimbabwe.