A brief history of mortgages in Ukraine
By Sergii Meleshchuk (UC Berkeley)
On Thursday, July 3, Verkhovna Rada accepted the bill onto
conversion of foreign currency mortgages into hryvnyas (286 votes for).
According to the law some individuals can convert the dollar-denominated
mortgage liability into Ukrainian currency preserving the interest rate but at exchange
level effective on January 1st 2014. The law was adopted at the
third attempt, after Speaker Turchynov threatened to close underground exits
from Verkhovna Rada so that MPs would have to face angry debtors who meanwhile
demanded adoption of the law under the walls of Parliament. Those debtors
suffered from the rapid devaluation of Ukrainian currency in the first half of
2014. When UAH/USD nominal exchange rate
plunged from roughly 8 UAH per USD to slightly less then 12, dollar liabilities
denominated in Ukrainian currency increased by almost a half in nominal terms. According to the new law debtors who made
their payments on time and whose mortgage level is below 1 mln UAH can benefit
from interest-preserving currency conversion of their loans. This episode is the second currency crisis in
the last 6 years; both had adverse effects on Ukrainian mortgage market, however,
the main is problem high cost of funds for Ukrainian banks that makes hryvnia
lending unattractive and makes consumers borrow in foreign currency.
