The Ministry of Finance will issue domestic government bonds to finance the “eOselya” program of preferential mortgages
25 December 2024 10:42
The Cabinet of Ministers has instructed the Ministry of Finance to issue UAH 20 billion worth of domestic government bonds to recapitalize the state-owned Ukrainian Financial Housing Company (Ukrfinzhytlo), which operates the eOselya mortgage program. This is stated in the relevant Government Resolution No. 1486, published on the Government portal, "Komersant Ukrainian" reports.
The issue of domestic government bonds is to be carried out by the end of 2024. The Resolution also specifies what kind of domestic government bonds and for what amount should be issued, namely
for UAH 10,000,000,000 – with a maturity of 10 years and an interest rate of 12.6 percent per annum and a coupon period of one year;
uAH 5,000,000,000 with a maturity of five years and an interest rate of 15.84 percent per annum and a coupon period of six months;
for UAH 5,000,000,000 with a maturity of four years, an interest rate of 16.35 percent per annum and a coupon period of six months.
The Procedure for Acquisition of Shares of the Additional Issue of Ukrfinzhytlo in Exchange for Domestic Government Bonds in 2024 was also approved.
The Ministry of Economy was instructed to acquire into state ownership shares of the additional issue of Ukrfinzhytlo in the amount of UAH 20,000,000,000 in exchange for domestic government bonds by December 2024.
Why the need for additional financing of the mortgage program arose
Recently, the National Bank in its December Financial Stability Report stated that in the second half of 2024, banks significantly reduced the number of preferential mortgage loans issued under the eHouse program. According to the NBU, this was due, among other things, to a shortage of funds at Ukrfinzhytlo, the state-owned company responsible for the program.
The NBU stated that the eHouse program was expected to slow down.
According to the report, “in general, in eleven months of 2024, mortgages were issued more than one and a half times more than in the entire previous year, but in the second half of the year, on average, financial institutions provided one third fewer loans per month than in March-April, when the volumes were record-breaking.”
According to the NBU, lending has slowed for two reasons.
“Firstly, the program operator, Ukrfinzhytlo, changed the terms of lending. The company seeks to increase the share of loans in the primary market, even while reducing lending to finished housing… Second, Ukrfinzhytlo once again faced a lack of funds,” the report says.
The NBU also drew attention to other changes in the mortgage lending program. First, the number of banks participating in the program has increased to eleven, but some new participants have not yet provided a single loan and more than 90% of loans are concentrated in three state-owned banks.
Secondly, the number of accredited developers has also increased: now you can get a mortgage for an apartment in 201 buildings from 91 developers.
Third, the October design changes included limiting the maximum age of housing to three years (except in a few regions and for internally displaced persons), reducing the down payment for young people to 10%, and raising rates after the tenth year of lending.
Thus, it can be assumed that solving the problem of Ukrfinzhytlo’s cash shortage should help it to revive lending.
This is not the first time the government has financed Ukrfinzhytlo
The Cabinet of Ministers of Ukraine has injected funds into the capital of the Ukrainian Financial Housing Company before. As BusinessCensor reminds, at the end of 2021, Ukrfinzhytlo was capitalized by UAH 20 billion through operations with domestic government bonds, and the following year the same was done, but by UAH 30 billion. These funds, as noted, will help to implement the program of providing citizens with housing on mortgage terms.
