Borrowers urge Russia to end ‘financial slavery’

By Anna Smolchenko, AFP

MOSCOW — When Olga Savelyeva took out a US$226,000 mortgage to buy a small apartment on the outskirts of Moscow in 2008, she could never have imagined that the ruble would lose more than half its value in a few short years. But Savelyeva’s US$2,090 monthly installments have skyrocketed in ruble terms due to the Russian currency’s dive against the dollar. The resulting jump in monthly payments from 49,000 to 115,000 rubles now devours most of her family’s income. The 30-year-old mother of a young daughter and her husband have tried to honor their repayment commitments but despite their best efforts, December’s installment was US$400 short.

Savelyeva is one of tens of thousands of Russians who took on lower-interest foreign currency-denominated mortgages in the years before the financial crisis and now struggle with repayments as the ruble’s value shrinks. Russia’s central bank says that as of Nov. 1, foreign exchange mortgage debt totaled 120.5 billion rubles (US$2.28 billion). According to the state-run Agency for Housing Mortgage Lending, those loans represent 3.3 percent of the total volume of outstanding mortgage debt. Critics say the government is deliberately downplaying the scope of the problem and claim some 100,000 to 150,000 people are likely affected. Hundreds of Russia’s hard-currency mortgage holders have created a social media group, attracting members from Yekaterinburg in the Urals to the exclave of Kaliningrad on the Baltic Sea. In a letter to central bank chief Elvira Nabiullina, the group threatened a ��powerful social explosion�� if assistance isn’t provided. Some 100 homeowners picketed the central bank this month and around 500 people plan to take to the streets this week, the first significant protests over the collapse of Russia’s currency �X down some 40 percent against the greenback this year. ‘Left alone with misfortune’ With Russia’s mortgage industry still in its formative phase, taking out a loan to buy a home is considered risky business. Even before the crisis, interest rates of 10 to 12 percent on foreign currency loans �X and 12 to 14 percent on ruble-denominated mortgages �X mean many Russians will wind up paying double to triple the principal borrowed on 15- to 20-year loans. The group of foreign currency mortgage holders says Russia’s financial crisis, exacerbated by falling oil prices and Western sanctions over Ukraine, has transformed their loans into ��financial slavery.�� To make matters worse, interest rates are expected to rise further still in the wake of the central bank’s decision this month to hike its key rate to 17 from 10.5 percent to prop up the ruble.