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10 Aug, 2007 06:58

Mortgages could make Russian dreams come true

Three of Europe’s top banks have signed a deal to triple the number of homebuyers in Russia’s provinces. It comes as the Central Bank reveals that the regional mortgage market remains untapped.

VTB, Deutsche Bank and Europe’s number two financer Unicredit penned the deal to pump $US 2 BLN into mortgage lending for Russia’s regions. The new alliance will perform securitization and refinancing – reducing bank risk by buying up existing mortgages and finding them money for new credits.

The senior vice president of VTB, Andrey Suchkov, revealed the timeframe: “We’re number one for primary mortgages, now VTB secondary mortgages are targeting the regions. We’re in talks with 10 banks ranked between No 20 and No 100 by assets in Russia. Our first client should put pen to paper by the autumn with the rest within six months,” Mr Suchkov said.

Deutsche Bank is betting on the regions sustaining record mortgage growth: “The mortgage market grew from $US 4 BLN to $US 8 BLN last year, it doubled last year. Is it going to double again? I think it is. We have clients among the largest regional banks who are writing $US 50-75 MLN of mortgages a month – a month!”  exclaims Tim Nicolle, Deutsche Bank Securities Director.

Unicredit subsidiary HVC says this will mean greater choice for homebuyers, and better rates: “The net result for the borrower effectively should be that one – he gets flexibility in terms of product choice, and secondly – because of the impact of capital markets the actual margin reduces, which actually is beneficial for the borrower – so cheaper mortgages,” explains Fazel Ahmed, Unicredit Securities Director.

At the same time across town Russia’s mortgage regulator was claiming rates will fall to the European average of 8% within 18 months. If banks can avoid the bad loans plaguing America, this will allow many people to get their dream of owning a home.