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re: Russian borrowers money woes include their home mortgages
Posted on 12/13/14 at 11:54 am to LSURussian
Posted on 12/13/14 at 11:54 am to LSURussian
Are they paying their mortgages in dollars or rubles? The bank should be the one taking the hit, not the borrower.
2
Posted on 12/13/14 at 12:00 pm to Layabout
quote:Why?
The bank should be the one taking the hit, not the borrower.
They borrowed a foreign currency to buy their house. They have to repay the foreign currency using rubles to buy that currency.
The reason they borrowed the foreign currency was the interest rate on foreign currency loans was MUCH less than if they had borrowed rubles, something like 5% annual interest versus 10% for rubles.
If the ruble devalues, as it has, they have to come up with more rubles to pay their loan back.
So they took a chance, assumed the foreign exchange risk and they lost their bet that the ruble would remain relatively stable versus the currency they borrowed.
Posted on 12/13/14 at 5:08 pm to Layabout
The banks likely will take the hit. If the average Russian is like the average American they wont be able to foot the bill. This would be like someones note in the US going from 1500 to 3000 per month.
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