Discussion underway in Russia about introducing varying interest rates for mortgages
In a move aimed at making mortgage lending more equitable and affordable, the Russian government is considering the introduction of differentiated interest rates for mortgages based on average wages in various regions. The idea has the backing of President Vladimir Putin and Vyacheslav Volodin, the State Duma Speaker [1].
The proposed scheme, if implemented, would make mortgage rates more aligned with local income levels, thereby promoting social justice and potentially curbing population migration to large cities and southern regions. This approach could increase mortgage demand in regions with lower rates and average wages, thereby boosting local real estate markets [3].
However, the impact on the real estate market and mortgage defaults is not straightforward. Lower mortgage rates in regions with lower average incomes may increase buyer numbers, pushing up housing demand and prices locally. In regions with highly elastic demand, such as Krasnodar, prices might rise sharply, which could reduce the benefits of lower rates and affordability for buyers [1]. Infrastructure investments could help offset price increases in some regions, making buying homes more attractive [1].
The policy aims to improve borrowers’ ability to repay, thus reducing mortgage default risks. Currently, the flat mortgage rate system does not account for regional income disparities, which can lead to mismatches between mortgage costs and borrower repayment capacity [3]. However, detailed data on the effect of this policy on default rates is not yet available.
The differentiated system was previously tried in 2006 but was tied to down payment and loan term rather than income. The current plan focuses on income, aiming for greater social justice and market segmentation by region [3].
Meanwhile, the Russian real estate market is facing challenges. Nine out of the 20 largest developers in Russia experienced a decrease in revenue in the first half of 2025 due to the cancellation of subsidized mortgages and the lack of cheap loans [2]. Expensive mortgages are among the top concerns of Russians, with significant drops in revenue reported at GK "Yugstroyinvest", GK "Tochka", and Setl Group, among others [2].
In an effort to address these concerns, Deputy Prime Minister Marat Khusnullin reported that relevant ministries are working on introducing differentiated interest rates for family mortgages based on the region of residence and the number of children [4]. This initiative, if successful, could lead to more equitable mortgage conditions tailored to regional economic realities, stimulating regional housing markets while potentially reducing defaults.
Sources:
[1] Kommersant. (2025). Differentiated mortgage rates to be introduced in Russia. Retrieved from https://www.kommersant.ru/doc/4515827
[2] Vedomosti. (2025). Russian real estate market facing challenges. Retrieved from https://www.vedomosti.ru/realty/articles/2025/08/12/877584-rossiyskiy-rynok-nedvizhimosti-pod-voyennyy-ugrozoj
[3] RBC. (2025). Differentiated mortgage rates in Russia: what to expect. Retrieved from https://www.rbc.ru/economics/25/08/2025/5f2099f59a794781e38b127f
[4] TASS. (2025). Russian government to introduce differentiated interest rates for family mortgages. Retrieved from https://tass.ru/ekonomica/12756485
The differentiated interest rate system, should it be implemented, could lead to more equitable mortgage conditions in various regions, potentially boosting local real estate markets. This policy might stimulate regional housing markets, while potentially reducing mortgage default risks that are often exacerbated by the flat mortgage rate system's lack of consideration for regional income disparities.
Political backing from President Vladimir Putin and State Duma Speaker Vyacheslav Volodin, combined with efforts from relevant ministries to address affordability concerns, indicates a focus on improving overall financial accessibility in the business sector and promoting social justice.
