What is the state of the global mortgage market and to what extent can we rely on the headline data? The company BestBrokers has issued report on the housing affordability and real mortgage interest rates.
This report reveals that Russia tops that list, with a rate of 12.30 percent. What does this headline rate reveal? Perhaps not as much as economists hope since the nominal mortgage interest rate does not always depict a realistic picture of the real estate market.
BestBrokers have calculated the ‘real’ mortgage interest rates across 62 countries around the world by subtracting the inflation rate from the nominal mortgage rate. Based on data for the third quarter of 2024, it was found out that Russia holds the highest real mortgage interest rate with 12.30 percent. The Dominican Republic ranks second with an average real rate of 9.55 percent, followed by Mexico in the third place with a real mortgage rate of 7.48 percent.
To fight inflation, the Bank of Russia increased its key interest rate five times in 2023, and by July of this year, it had reached 16 percent. In late October, the central bank hiked the interest rate to record-high 21 percent.
How affordable is this? By considering the average net salary in Russia (which is $848.55) and an 8 percent inflation rate (which was current for the third quarter of year) then the “real” salary drops to $780.67 per month. This means Russia actually ranks 30th in terms of home price-to-income.
In 2020 the Russian government introduced a preferential mortgage programme with rates of up to 8 percent. The approach was intended to support the real estate market during the COVID-19 pandemic. This policy also became popular among homebuyers and was extended until 2024.
That was 2019. In 2024, is this mortgage goal within reach of the average citizen under Putin? The cost of a 100-square-metre property in Russia is about 222 real monthly wages ($173,481.50 according to Numbeo). This equals the average net earnings for 18 years and 6 months in the country.
Mortgages vary considerably from one country to another. Beyond Russia, Sweden has the lowest real interest rate in Europe with minus 1.21 percent, followed by Belgium with minus 0.52 percent and Malta with minus 0.44 percent.
Another interesting country is India, now ranking 10th with 6.63 percent, while South Africa appears on the list in11th position with 6.55 percent. Indonesia is 13th on the list with a rate of 5.73 percent, followed by Brazil with 5.55 percent and Poland where the real mortgage interest is 5.1 percent. As a comparator, the U.S. ranks 17th with 3.98 percent.
