The mortgage market is one of the fastest-growing elements of Russia's banking business. The percentage of home purchases through mortgages has risen from 3.5 per cent in mid-2005 to 14 per cent by the middle of 2007. And the banks expect more of the sam

Some banks offer variable mortgage rates but these are not popular among customers.

“Currently in our portfolio, around 16 per cent take variable-rate mortgages, and that figure’s declining. The advantage of a variable-rate mortgage is that the client is free to pre-pay at any time,” commented Igor Kuzin, CEO of DeltaCredit Bank, Moscow.
Another lender on the Russian mortgage market, Raiffeisen Bank, also says that customers prefer fixed-rate mortgages, because they provide a clear plan of their future outlay.

Whether their rates are fixed or variable, anyone taking out a new mortgage in Russia next year is likely to be feeling the pinch as the cost of borrowing for banks rises and is passed on to customers. 

In 2007 the banks started raising mortgage rates, which may be leading to a small but noticeable increase in defaults.

But the banks say tight lending criteria mean that most Russian mortgage customers are a safe bet, and it’s likely to stay that way in the short term.