Kazakhstan: Kazakhstan works new plans to boost mortgage market

Next fears emerged in February that that the tenge will suffer devaluation in view of worsening economic factors and Russia' s financial slump, Kazakhstan’s government is taking aggressive steps to stabilize the country's financial situation.

Kazakhstan has developed new measures to stimulate increase in its mortgage market next turbulence hit the sector. The mortgage market is presently set to recover under the government's influence, reported Ranking.kz – analytic service .

The government plans to allocate 130 billion tenge (185.65 tenge = $ 1) to the refinancing of residential mortgage loans disbursed during the period 2004-2009.

This is 15 % of the total mortgage portfolio of banks (all mortgage loan portfolio of banks in January amounted to 916.5 billion tenge).

Back in December some Kazakhstan-based banks suspended their mortgage programs denominated in the tenge, the country’s national currency. Experts assigned the problem to shortages of tenge. Later Kairat Kelimbetov, the Central Bank Governor, announced that banks would resume their lending operations in a little while.

A number of banks have stopped issuing mortgages in tenge, fearing the devaluation of the national currency in February will hit their bottom margin.

The average annual increase rate of the mortgage market in the corridor was 5 - 10 % in the last five years said Ranking.kz. It said for comparison, the market of consumer would add an annual average of 25 %.

Astana has seen a steady increase of mortgage loan applications as part of its demographic boom. For five years, the people in the Kazakh capital has increased by 155.7 thousand people, up to 853 thousand people.

Before Kazakhstan’s Central Bank said it will provide the country’s banks with money to bolster mortgage programs. However, it noted that the measure did not include writing off debts as the only intent is to improve market conditions and make mortgages additional available.

Of the top banks in the country, the People's Bank has accelerated its mortgage market increase. Following the publication of 2014 financial reports, the bank increased the volume of its mortgage loans by 30 % to 139 billion tenge.

An extra factor in the increase of the mortgage market is the refinancing of loans, according to Ranking.kz.

It said the major goal of refinancing is to reduce the deficit burden of the ultimate borrowers by reducing interest rates and / or increasing the loan period.

Refinancing loans increases the loyalty of existing customers and contributes to the emergence of new customers.

Three major banks will offer refinancing opportunities, while eight second-tier banks with 16 proposals compose the total market of refinancing.

The maximum loan all depends on the price of the collateral (50-80 %) and the solvency of the borrower. PNB Kazakhstan offers the lowest maximum all of refinancing - up to 7.5 million tenge, while VTB offers the highest - up to 120 million tenge.

The People's Bank offers refinancing with minimal (up to 36 months) and a maximum term (up to 360 months). The popular term is 20 years.

The lowest effective rate on the market as from the People's Bank is 12.3 %, the highest is- in PNB Kazakhstan - 30.6 %.