Saturday, January 10, 2015

PUTINomics: For Some Russians, Mortgage Costs Soaring Due To Ruble Slide

When they took out a mortgage on a small two-room apartment seven years ago, Oksana Li and her husband hoped to make a new home for themselves and their young son.
Now, like thousands of other Russians, they are seeing that dream unravel as they are unable to make payments — even by working longer hours and a second job.
That’s because they are part of a minority of Russians who took out mortgages denominated in a foreign currency to take advantage of lower interest rates abroad. As Russia’s currency collapsed in recent months, the cost of repaying those mortgages has gone through the roof.
‘‘In November, we gathered my entire monthly salary and that of my husband and took it to the bank, but the sum was still not enough to cover the new monthly payment,’’ said Li, a 35-year-old office manager with a Swiss franc mortgage.
Oksana Li staged a one-person picket on Dec. 28 
protesting her onerous mortgage payments.
When the Li family got their mortgage in 2008, their monthly payment was equivalent to 38,000 rubles. By the end of 2014, it was 129,000 rubles.
Taking mortgages in a foreign currency was an accepted practice in countries like Russia before 2008. The borrower could enjoy the interest rates of the country whose currency the loan was denominated in. Switzerland’s main interest rate, for example, is now near zero, while Russia’s rate is at 17 percent.
Food Prices in Russia Soar as Ruble Tumbles Further
But the benefits of the cheaper rates come at the risk of fluctuations in the currency. In the case of Li, payments have soared because the ruble fell by half since last year.
Read the rest of the story HERE.

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