Saturday, August 27, 2016


Russian Dollar-Mortgage Holders Feel Ruble Crunch

Yelena Balanovskaya stands in the newly decorated kitchen of the apartment that she bought with a dollar mortgage that she's now struggling to pay off because of the ruble crisis.
Yelena Balanovskaya stands in the newly decorated kitchen of the apartment that she bought with a dollar mortgage that she's now struggling to pay off because of the ruble crisis.

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By Tom Balmforth

MOSCOW -- In March, Yelena Balanovskaya and her husband took out a dollar-denominated mortgage to buy their dream apartment.

At the time, the 41-year-old didn't think it was much of a gamble. The interest rate was lower than for ruble-denominated mortgages. The Russian economy was in good shape. And Balanovskaya and her husband, who had two children and one on the way, both had good jobs.

Paying back the $200,000 loan, they thought, would not be a problem.

Nine months later, it's an albatross around their neck.

As the ruble has collapsed against the dollar, her $2,200 monthly payments have nearly doubled, from 77,000 rubles to 142,000. And if the ruble doesn't recover, Balanovskaya fears she won't be able to make her payments in the future.

And her bank, Reso Kredit, has shown no mercy and will only refinance the mortgage in rubles at the current exchange rate with a further interest rate hike of 21.5 percent.

"If I pay it off at today's rate, even if I sell this apartment, I'm going to be paying this bank until I'm a pensioner," Balanovskaya says.

To make ends meet, Balanovskaya and her family -- including her 3-month-old toddler -- moved into a cramped one-room apartment on the outskirts of Moscow. Instead of moving into the new family home, she has rented it out.

No Help In Sight

Balanovskaya is among tens of thousands of Russians -- estimates range from 25,000 to 150,000 -- who are currently saddled with dollar-denominated mortgages.

At his annual press conference on December 18, President Vladimir Putin promised state support for the mortgage sector if propping up the ruble forces the central bank to keep the interest rate at 17.5 percent for a sustained period of time. 

But he did not mention the situation with dollar mortgages. And with central-bank authorities indicating that they won't come to their rescue, some of them are taking to the streets in protest.

On December 12, about 100 protesters gathered in front of the Bank of Russia in Moscow carrying signs with slogans like "Hard currency mortgages mean slavery for life," and "I don't want to live on the streets." 

Similar rallies have taken place at the same location in recent weeks.

Many of them took out foreign-currency mortgages between 2006-08, when the Russian economy was booming and the ruble was stable. Like Balanovskaya, they say they are ready to pay, but they want their mortgages refinanced in rubles at an affordable rate so that it's possible.

Some lawmakers, led by Oksana Dmitriyeva of the pro-Kremlin A Just Russia party, have penned a letter to the central bank calling for the mortgages to be restructured. Four other lawmakers from A Just Russia signed the letter, the daily "Izvestia" reported.

Meanwhile, a lawmaker from the ruling United Russia party sent a separate appeal to the central bank on December 17, seeking some kind of solution to the problem as well as clarification on the number of dollar-mortgage holders.

Likewise, on December 1, Vladimir Rozhankovsky, director of the Nord-Kapital investment group, posted a petition to Bank of Russia head Elvira Nabiullina on the website on calling for hard-currency mortgages to be denominated in rubles. He called the situation "catastrophic." The petition has garnered almost 4,000 signatures. 

Nonetheless, on December 13, in the wake of small rallies, the central bank indicated that it does not intend to bail them out. 

Balanovskaya, meanwhile, is wondering where she will be able to cut costs while providing for her three children so she can pay her mortgage. "I don't go to restaurants. I don't buy myself diamonds. I don't go on expensive holidays abroad," she says. "I have five people to feed."

Tom Balmforth

Tom Balmforth covers Russia and other former Soviet republics.


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