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28 Jan, 2016 14:06

Russian govt to help homeowners with foreign currency mortgages

The Kremlin has agreed to allocate 4.5 billion rubles ($60 million) to help homeowners stuck with foreign currency mortgages. Seduced by lower interest rates, thousands have seen mortgage payments more than double as the ruble collapsed, and now risk losing their homes.

On Wednesday, desperate borrowers tried to block a central Moscow street leading to the Kremlin. The protesters, who are customers of different banks, are threatening mass protests if the banks do not make concessions.

“If the banks don’t care, the government should. About 20,000 families will be evicted and remain homeless. The children will be removed from their families because parents will have nowhere to live. The question here isn’t an economic one. Among the borrowers there are people with disabilities, people with cancer, they will all be left without registration. How will they get medical care?” said protest coordinator Snezhana Yaroschuk.

The government has acknowledged the problem and is partly compensating the homeowners, but there’s still no solution to the problem. According to the President’s press-secretary Dmitry Peskov, the people affected should have considered the risks themselves.

"Indeed, there are people who have got into a very difficult situation. But we should not forget that it was their choice and calculations when taking on certain obligations on those conditions,” said Vladimir Putin’s spokesman.

However, others question the banks responsibility for creating the problem by not disclosing the risk to their customers. There is also the issue of why Russia's banking system allows foreign currency loans in the first place.

The protesters are asking to recalculate their debt at the exchange rate of the day the contract was signed plus 30 percent. Another option is paying at the current exchange rate and a 60 percent debt haircut. Deltabank, one of the lenders that offered foreign currency mortgages, reported that last year it offered borrowers to refinance their mortgage. The bank says 2,200 people have done so.

Since the beginning of 2014, the Russian ruble exchange rate has fallen from 33 rubles to nearly 80 rubles against the US dollar.