The key rate has decreased, but it’s too early to flatter yourself: the market is slowing down

Ekaterina Maksimova

Earlier, the regulator predicted that by the end of the year the key rate would be in the range of 8.5-9.5%. Today's decision to cut the rate immediately to 8% was explained by the Central Bank as follows: the growth rate of consumer prices remains low, inflationary expectations of the population and businesses have noticeably decreased, and the decline in business activity is slower than the Bank of Russia expected in June.

Alexey Kovalev , Analyst of the Department of Macroeconomic Analysis of FG Finam, connects the decision of the Central Bank with the dynamics of inflation.

Earlier, the Central Bank improved its inflation forecast for the current year: from 18-23% to 14-17%. Today, the regulator announced other parameters: in 2022, annual inflation will drop to 12% -15% percent .

In June, deflation was recorded for the first time in the history of modern Russia. Prices, compared with May, decreased by 0.35%.

“According to the results of June, there was a departure of price dynamics in the negative area in monthly terms. And the point is not even that this happened for the first time since September 2020, but that deflation is atypical for June: in the entire history of observations (since 1991) this month in the Russian Federation, there has never been a negative price growth trend ", - said Alexey Kovalev.

But there is no reason to be deceived. Alexey Kovalev emphasizes that the head of the Central Bank, Elvira Nabiullina , linked the deflationary debut solely with a temporary price correction after their sharp rise in late February and early March of this year. And she doesn't see the possibility of a deflationary spiral.

Kovalev is confident that inflation will soon pick up.

“The cautious position of the regulator, apparently, is connected with the analysis of inflationary prospects for the second half of the year. In our opinion, a second wave of accelerated price growth cannot be ruled out in autumn against the backdrop of depletion of stocks of finished products and components, a potential depreciation of the ruble, as well as a change in the consumer behavior model as interest rates on loans and deposits decrease,” comments Alexey Kovalev.

Lending: thready pulse

Vyacheslav Putilovsky , Junior Director for Banking Ratings at Expert RA, emphasizes the importance of restoring the lending segment for the growth of economic activity.

“Mortgage, including subsidized mortgages, is now essentially the main driver of sales in the new building market after last year's price increase. The construction sector, in turn, has a serious multiplier effect on many sectors of the economy, and a slowdown in its development will have a negative impact on them. While consumer lending is largely focused on the purchase of imported goods. On the other hand, consumer credit is often taken for repairs or for a down payment on a mortgage, which also affects the activity of the construction sector, ”the expert commented to Novye Izvestia.

Olga Belenkaya , Head of the Macroeconomic Analysis Department of FG Finam, believes that that one of the factors that influenced today's decision of the Central Bank of the Russian Federation was the rigidity of monetary conditions. “Increased risk premium in lending rates and high requirements of banks to borrowers kept price and non-price terms of bank lending rigid. As a result, lending activity, while showing signs of recovery, remained subdued. The Central Bank of the Russian Federation believes that the decisions taken in April-July to reduce the key rate will increase the availability of credit resources in the economy and limit the scale of the decline in economic activity,” Olga Belenkaya believes.

The lending market, reacting to changes in the key rate, has been living in zigzags since February 2022. After a sharp drop in all segments of lending in the spring, the trends have changed since the beginning of summer.

According to the National Bureau of Credit History (NBCH), the volume of consumer loans in 2022 decreased by almost 50%. The main decline occurred in April and May, although the Central Bank has been actively lowering the key rate since April. Since June, the statistics have gone up: the issuance of consumer loans in the first summer month increased by 20.8% compared to May.

The volume of car loans this year also collapsed - by 40.9%, but growth has been recorded here since June: + 27.7% compared to May. The NBKI experts attributed the reason for the growth to a decrease in car loan rates, which, in turn, decreased following the key rate.

Mortgage as previously reported “Novye Izvestia” showed either a crushing collapse (up to 69%) or a revival throughout the first half of the year. Thus, in June (compared to May), the growth of loans issued for housing amounted to 78.5%.

At the same time, according to the Dom.rf portal analytics , in June, the issuance of mortgages for the primary decreased by 49%, the secondary - minus 70%. Overall drop: -64%. That is, the issuance of mortgage loans for six months of this year, when compared with the same period in 2021, despite the June surge, remained at a negative level.

Against the backdrop of the key rate that has been in effect until today, the weighted average mortgage rates have settled at the following level: the market for new buildings - 10.69%, preferential mortgages - 6.63%, family mortgages - 5.64%. In the secondary market, where there are no preferential lending programs, loans were issued, on average, at 10.81%.

On Friday, July 22, in parallel with the decision of the Central Bank to lower the key rate, President Vladimir Putin instructed the Cabinet of Ministers and Elvira Nabiullina's department to develop additional mechanisms to support mortgage lending by August 15. The growth of the mortgage loan portfolio in nominal terms should not be lower than 2021. Until July 25, Putin demanded to change the conditions for issuing preferential mortgages when buying housing in the primary market - the rate should not exceed 7% for the entire loan period.

Real estate: a little positive

President of the Russian Guild of Realtors (RGR) Irina Zyryanova believes that today's reduction in the key rate of the Central Bank of the Russian Federation is more important for the secondary market, which continues to suffer from contrasting conditions on mortgages. “The results of sales in the primary market today are completely determined by the federal agenda. But for the secondary, local conditions and the dynamics with which the markets entered in the spring are still important, ”Irina Zyryanova specified to Novye Izvestia.

Assessing the real estate market as a whole, the head of the RGR noted that the volume of real estate sales is still much less than the same period last year. And the market will have to put up with these negative indicators for a long time.

“At the same time, in many markets, apartment sales increased in June compared to April-May, and recovery growth continues. The exception is the Southern Federal District, where the previously active demand from investors has sharply decreased. For the market at such a moment, not only numbers are important, but also the direction of movement of sales volume. Recovery growth, even at a low pace, gives the feeling that the worst period of this year is over,” Irina Zyryanova summed up.

As for real estate prices, since June, apartments in new buildings began to slightly lose in price, the cost of meters on the secondary almost froze, but also showed a slight minus at the moment. Summer discount realtors explain the spring panic.

“The price level that has developed in the real estate market as a result of the panic caused by the devaluation of the ruble in March, at the current rate of the domestic currency, looks completely inadequate. Buyers, who have become much smaller, are only interested in apartments whose owners agree to big discounts. Obviously, even with the most favorable development of events, housing prices should return to the levels of early 2022, that is, lose the March-April increase. But it is not certain that the price reduction will end there,” IRN.RU analysts believe.

For example, the price bubble in Moscow and St. Petersburg in June has already begun to deflate, albeit slowly. Apartments in the primary market of the Northern capital by the end of the second quarter fell by 3.6%. The average cost of a Moscow meter in May lost less than 0.6%, and in June the price decline already exceeded 2%.

Deposits: no more bets

After an annual increase in deposits in March by 1.4% (to a record 8.5 trillion rubles), when banks set deposit rates at 20%, since June, on the contrary, demand for cash has been fixed. This is evidenced by the data of the Central Bank.

A serious role in the outflow of capital was played by the low profitability of ruble deposits, which does not keep up with the rate of inflation. With current inflation (15.9%), the average interest on deposits in June was 9.09-9.85%.

Vyacheslav Putilovsky, junior director for banking ratings at Expert RA, clarifies that now banks will offer a rate on deposits based not only on the size of the newly lowered key rate, but also taking into account the need for additional liquidity. "Funds of the population are still one of the most important sources of funding for banks," - said Putilovsky.

But the rates on deposits for individuals in the short term will definitely go down. Analysts' forecasts vary between 6.5%-8% and even 5%-6%. Accordingly, even with forecast inflation of 14-17%, the yield on deposits will lag significantly behind.

At the same time, the Central Bank believes that in the coming months, the increased propensity of the population to save will help maintain the inflow of funds to banks, mainly due to the ruble segment. This is reported in the review of the regulator "Banking Sector Liquidity and Financial Markets".

The next meeting of the Central Bank of the Russian Federation scheduled for September 16th. Olga Belenkaya , head of the department of macroeconomic analysis of FG Finam, noted that today's decision of the Central Bank of the Russian Federation to reduce the key rate immediately to 8% turned out to be a surprise for the market. And now the intrigue remains: whether the regulator will stop there.

According to Olga Belenkaya, the signal of the Central Bank of the Russian Federation, transmitted today, suggests both a possible continuation of the rate cut (already at a slower pace) and a pause: "The Bank of Russia will assess the feasibility of reducing the key rate in the second half of 2022."

The new forecast for the average key rate of the Central Bank of the Russian Federation for this year suggests the possibility of both maintaining the rate at the level of 8% until the end of the year, and its further reduction to about 7%. For next year, the average key rate forecast has been reduced from 7-9% to 6.5-8.5%.