Should you take out a mortgage in 2024: expert advice and forecasts

Content

1. Specifics of mortgages in current conditions
2. Who should take out a mortgage now?
3. Which categories of people are better off waiting?
4. Expert forecast: what will happen to real estate rates and prices in 2025
5. What questions should you ask yourself before taking out a mortgage now?

Specifics of mortgages in current conditions

The current mortgage situation can be described as follows:

• High interest rates. In 2023 and 2024, mortgage interest rates increased significantly due to the Central Bank’s key rate, which is used to combat inflation. This made mortgages more expensive for borrowers. The average mortgage rate on the primary market is now more than 23%.
• Increased risks for borrowers and, accordingly, increased requirements for them. As market rates increase, the monthly payment increases and, consequently, the burden on the family budget. The Central Bank and banks began to impose increased demands on borrowers, since not everyone will be able to cope with such a financial burden. The size of the down payment is increasing, and the requirements for the income and length of service of potential borrowers are increasing.
• Increased popularity of programs with government support. Also, due to high rates, programs with reduced rates are the only solution for many.
• Alternatives to mortgages are emerging and gaining popularity. First of all, this is rent and the rental housing market. But there are also options that combine the characteristics of both rent and mortgage. Including renting an apartment with its subsequent purchase from some developers or programs to help save for a down payment.

Who should take out a mortgage now?

In the current economic climate, the decision to take out a mortgage should be weighed, especially given the high rates and instability in the market.

Who should still consider a mortgage?

For those who are eligible for preferential mortgage programs. If you qualify for government programs, rates may be significantly lower than market rates.

Valid:

There are also regional mortgage programs, more than 90 of them. Whether they exist and what the conditions are, you can check with the administration of the city or region.

Preferential conditions make mortgages more accessible and profitable. But at the same time, programs are limited in time and by the limits of allocated funds for their implementation. Therefore, if you meet their conditions, then there is no need to wait. For example, if there is one child in the family, then you need to get a “Family Mortgage” before he turns 7 years old.

Which categories of people should wait to get a mortgage?

Now – for those who do not qualify for preferential programs (federal and regional). Obtaining a housing loan under market conditions risks large overpayments.

At any time:

• if there is no stable income;
• if the mortgage payment exceeds 30-40% of income;
• if there is no down payment, otherwise the mortgage terms may be significantly less favorable;
• if you already have a lot of loans or are going to take out a consumer loan for a down payment;
• if there are no savings and a financial cushion in case of unforeseen situations, for example, job loss.

Expert forecast: what will happen to real estate rates and prices in 2025

The forecast for mortgage rates and real estate prices over the coming year depends on a number of factors, such as the macroeconomic situation, actions of the Central Bank, inflation expectations and activity in the real estate marketthe expert notes.

Mortgage rates could remain high or even rise temporarily over the coming year. This is due to the fact that the Central Bank of Russia continues its policy of containing inflation by increasing the key rate.

Mortgage rates

Possible developments regarding mortgage rates:

• Rising rates or maintaining high levels

The Central Bank may continue to raise the key rate in response to inflation risks, which will entail an increase in mortgage rates. At the moment, mortgage rates reach 23-25% and higher, depending on the type of loan and bank. If the Central Bank rate increases, then rates on banking products will also increase – both on loans and on deposits.

This scenario is possible if inflation remains high and economic instability continues.

• Gradual rate reduction

If inflation stabilizes and the economy begins to recover, the Central Bank may ease monetary policy, which will lead to a reduction in the key rate. In this case, mortgage rates will also gradually decline by the end of 2024. However, this will depend on many factors – such as the geopolitical situation and general economic conditions.

Expert opinion

According to the head of the Analytical Center DOM.RF, Mikhail Goldberg, during 2025 the mortgage rate may decrease, but will not be lower than 15%. Rates may reach the target levels of 4-5% no earlier than in 5 years or more.

• Preferential programs

Preferential mortgage programs (“Family”, for IT specialists, etc.) will play a key role in maintaining the availability of mortgage loans. The state, Kovalev notes, plans to continue to subsidize interest rates for certain categories of borrowers, which will make mortgages more affordable for certain groups of the population, even with generally high rates.

Real estate prices

Their dynamics also depend on many factors.

They may continue to rise if demand for real estate is high and supply is limited. This may be especially true for large cities.

Prices may slow down or stop growing, since market mortgage rates are now very high, requirements for borrowers are also increasing, and due to inflation, building materials and the cost of work are becoming more expensive. Depending on the development and volume of construction in specific regions, prices will rise, and in some they will slow down.

What questions should you ask yourself before taking out a mortgage now?

Before taking out a mortgage in the current environment, assess your readiness and ability to obtain a loan. Questions such as:

1. Can I take advantage of any government support? This is worth thinking about first. Because the definition of state support includes mortgage programs that will allow you to get a loan at a rate significantly lower than the market rate, and various payments that will help you close your mortgage ahead of schedule (say, a payment of 450 thousand rubles to large families). All this can significantly reduce the financial burden. On the website ask.dom.rf You can find the Housing Program Catalog.
2. If the answer to the first question is “no,” then a potential borrower should consider, “Can I afford a mortgage at current market rates?” This is an average of 23% per annum for primary housing, for example. Experts predict a reduction in rates over the next 5 years. It might be worth waiting and saving up for a down payment.
3. “What size down payment do I already have and do I have a financial cushion? Will I be able to afford the apartment I want?”
4. Do not forget that a mortgage is a long-term commitment. So it’s worth asking yourself: “Will I be able to pay off my mortgage over 10, 15, 20 years or even longer?” Here you need, first of all, to make sure that your income is stable, but also to think, for example, about different types of insurance.

The financial literacy of the population is increasing, Kovalev notes, but weaknesses still remain. For example:

• Lack of awareness among citizens about banking products. Not everyone knows how loans and credit cards work, how to properly repay them ahead of schedule, or how the state regulates this area. Hence the lack of awareness of the risks of their use.
• Lack of information about current state support measures and benefits. Even in the housing sector, there are more than 400 different measures throughout Russia. However, many Russians think that such measures are available only to a narrow circle of citizens, although this is not the case. For example, tax deductions are available to any employed citizen.
• Lack of attention to future solvency. Here we can also talk about the short term, when citizens do not have a safety net in case, for example, they lose their jobs. The same applies to the long term, when citizens hope for a future state pension and do not care about their own savings. So, a person can take out a mortgage, the payment for which will borrow all available funds.
• Inattention to the terms of contracts. People often sign mortgage agreements without studying all the details. This may concern the conditions for early repayment of the loan, penalties for late payments, rate changes and other important details.