How will the increase in the key interest rate affect the mortgage

The Board of Directors of the Bank of Russia at its first meeting this year raised the key rate by 1 percentage point to 9.5% per annum, the press service of the regulator reported. The Central Bank makes a similar decision for the second time in a row. Earlier, he increased the indicator in a similar way at the end of 2021.

Thus, now the key rate has reached a record level since the end of April 2017. Then it was 9.75%, in early May it was reduced to 9.25%. In general, since March last year, the Central Bank has raised the rate for the eighth time in a row.

"On February 11, 2022, the Board of Directors of the Bank of Russia decided to raise the key rate by 100 bp, to 9.50% per annum.

Inflation is significantly higher than the October forecast of the Bank of Russia. The expansion of demand continues to outpace the possibilities of increasing output. The rapid growth of economic activity with limited available labor resources increases inflationary pressure," the report says.

The Central Bank admits the possibility of a further increase in the key rate at the next meetings "if the situation develops in accordance with the baseline forecast." Decisions on the key rate will be made taking into account the actual and expected dynamics of inflation relative to the target, the development of the economy on the forecast horizon, as well as the assessment of risks from internal and external conditions and the reaction of financial markets to them.

The next meeting of the Board of Directors of the Bank of Russia, at which the issue of the level of the key rate will be considered, is scheduled for March 18, 2022.

In the base forecast, the Bank of Russia raised the range of the key rate for 2022 from 7.3-8.3% to 9-11%. The regulator also changed the forecast for 2023 from 5.5-6.5% to 7.5-9%. The forecast for 2024 remained the same - within 5-6% on average for the year.

On November 15 last year , the chairman of the Central Bank, Elvira Nabiullina, said that the regulator would lower the key rate to a neutral level of 5-6% per annum no earlier than mid - 2023 . She explained then that the measures that the Central Bank takes to reduce inflation operate with a temporary step: their impact is fully realized in three to six quarters.

Returning to the real estate market, we note that an increase in the key rate may affect the terms of mortgage loans, namely a significant increase in the rate.

We recommend to all our clients who are currently solving their housing issue with the help of mortgage lending, not to delay, but to get a Bank decision and fix the mortgage rate. This will allow you to comfortably continue searching for a suitable option. Today, our company is a partner of a number of leading banks in the country, which allows us to give an additional discount on the mortgage rate for our customers.