The Russian Federation’s full-scale invasion of Ukraine left thousands of Ukrainians homeless. Their homes became ruins or remained in the occupied territory. For many, a mortgage seems like the only chance to start over, to feel that owning a roof over your head is still possible. But reality hurts. Crazy interest rates, unstable economy and risks of war turn this chance into a game with an unknown ending.
Having your own apartment has long ceased to be a guarantee of stability. In Ukraine, a person, taking a mortgage, risks losing much more. Unprecedented high rates, economic instability and strict requirements of banks turn the dream of owning a home into constant stress, where every payment is a challenge. Let’s try to find out if a mortgage can really be a salvation, or if it is another way to a debt trap.
A risky dream
Today, the Ukrainian mortgage market is less than 0.5% of GDP. And this, unfortunately, is one of the lowest indicators in the world. In order to reach even the minimum level among European countries, such as Moldova, where it is 4.6%, it is necessary to provide mortgages in the amount of about 350 billion UAH or issue 220 thousand loans. Despite this, the demand for mortgages in Ukraine significantly exceeds Moldova’s. And it is not surprising, because the population of Ukraine is 10 times larger.
Among the total volume of Ukrainian mortgages, which is UAH 36.8 billion, the largest part (UAH 23.8 billion) is the state program “eOsel”. The rest of the funds include UAH 5.5 billion in problem loans. In practice, the government focuses on mortgage financing from the state budget. However, it is quite clear that this is lacking even for defense and critical needs, not that to support the mortgage. Controlling almost two-thirds of the banking system allows the government to support mortgages through non-banking institutions, including Ukrfinzhitlo.
The “eOselya” program, managed by the “Ukrainian Financial Housing Company” (“Ukrfinzhitlo”), is financed by domestic state loan bonds (OVDP). UAH 70 billion has already been spent on the capital of Ukrfinzhitla, and an additional issue of bonds worth UAH 30 billion is planned for 2025, which will increase the costs to UAH 100 billion.
Loans under the program are provided at 3% for military personnel, police officers, doctors and educators, subject to a personal contribution of 20% of the housing cost. Other categories can get a mortgage at 7% per annum. As of today, 14,700 soft loans for the amount of UAH 23.8 billion have been issued. However, out of more than 100,000 submitted applications, only 34,000 for the amount of UAH 55 billion were approved. In order to satisfy the current demand, at least 200 billion hryvnias are needed in addition.
How to finance such large-scale programs, if they largely depend on the state budget? In developed countries, mortgage markets work thanks to a two-tier system. The first level is the issuance of loans (primary market), the second is the circulation of mortgage bonds on the secondary market. Investors, including pension funds, buy these low-risk bonds. Such a system ensures continuous refinancing of loans and allows borrowing new resources for lending.
How mortgages developed in Ukraine
Over the years, many problems have accumulated in the housing sector of Ukraine. Currently, about 600,000 people are waiting for housing without a real prospect of getting it. There is still no mechanism for social rent and flexible housing stock, and the legislative regulation of housing rent remains imperfect. And in general, the state mortgage policy does not effectively support internally displaced persons, and a large part of the housing stock remains outdated. Every day, the devastating effects of war exacerbate the problem, increasing the number of people who need housing immediately.
Before the beginning of the war, the Ukrainian mortgage market showed rapid growth. Even in 2020, despite the COVID-19 pandemic, the number of loans issued increased by more than a third compared to 2019. This was due to lower interest rates, which stimulated the demand for housing loans. However, with the beginning of the large-scale invasion of the Russian Federation in Ukraine in 2022, the market experienced a sharp decline.
During the war, the mortgage market faced a number of serious problems:
- High interest rates – due to economic instability, mortgage rates have risen significantly, and by the end of 2024 they were between 14% and 30% per annum.
- High down payment – the standard down payment for housing remained at the level of 30-40% of its value, which became a serious obstacle for many.
- Risks for banks – due to hostilities and economic instability, banks have faced a high probability of loan defaults.
Despite these difficulties, some progress was made in 2024 thanks to government programs. Ukrainians took out mortgage loans for a record amount, which even exceeded the pre-war figures of 2021. This was largely facilitated by the state program “eOselya”, which offers citizens preferential credit terms.
The terms of standard mortgage loans in Ukraine can vary significantly depending on the bank. Usually, citizens aged 18 to 70 can get loans, but some banks set their own age limits, granting loans to people aged 23 to 65. The annual mortgage interest rate depends on the discount rate of the National Bank of Ukraine, which was 13.5% at the end of 2024. As a result, the cost of a standard mortgage varies from 14% to 30% per annum. However, banks are trying to accommodate and offer both fixed and floating rates.
It should be noted that the YeOsel program provides its services through ten partner banks: Oschadbank, PrivatBank, Ukrgasbank, Globus Bank, Sky Bank, Ukreximbank, Sense Bank, BISbank, RadaBank and Bank Credit Dnipro. As part of this program, mortgage loans are provided at 3–7% per annum for a term of 1 to 25 years, and loan amounts can vary from UAH 100,000 to UAH 12 million. The interest rate depends on the category of the borrower and his professional activity.
A rate of 3% per annum is available to public sector workers, provided they have no other accommodation or their property is unsanitary. At the same time, the rate of 7% per annum is granted to other citizens of Ukraine subject to the following conditions:
- the borrower is not on the sanctions lists;
- the borrower does not participate in other state housing programs;
- the borrower has an official income and does not own his own home.
According to the National Bank of Ukraine, mortgage lending currently takes place mainly within the framework of the “eOsel” state program, while the number of loans issued outside of this program remains minimal. Thus, in the first eleven months of 2024, almost one and a half times more mortgage loans were issued than in the whole of 2023. At the same time, in the second half of the year, banks began issuing a third less loans each month compared to March-April, when record volumes were observed.
The National Bank of Ukraine explains the decrease in lending rates due to the change in the conditions of the YeOselya program from the Ukrfinzhitlo operator. In particular, a limit on the age of housing to three years was introduced (with the exception of certain regions and for internally displaced persons), the first installment was reduced to 10% for young people, and interest rates were increased after the tenth year of lending.
Realtors add that “Ukrfinzhitlo” faced a funding deficit, which also affected the slowdown in the issuance of mortgage loans.
Due to the lack of long-term mortgage bonds, interest rate risk is also exacerbated. In Ukrainian banks, lending rates remain tied to deposit rates and fluctuate with them, which limits the possibility of fixing rates for borrowers. In order to solve these problems, Ukraine needs to create a self-sufficient model of the mortgage market, based on international experience, with an emphasis on the secondary market of mortgage securities.
Mortgage in foreign countries
While mortgages in Ukraine resemble playing with fire, in many foreign countries the situation looks different – although not everything is so perfect there either. For example, in the USA, a mortgage is a common thing: the average interest on the loan ranges from 6-7%, and the payment period can reach up to 30 years. Even here, however, rising rates due to inflation are causing people to delay home buying.
Things are different in Europe. In Germany, mortgages are more affordable due to low rates — about 3-4%, but banks require a significant down payment (up to 20-30% of the housing cost). But in Sweden, the mortgage system with flexible terms is generally flourishing, but with one trick: most people pay only interest, without reducing the principal amount of the debt.
In China, mortgages are almost a cult. Due to the constant rise in real estate prices, buying a home has become a symbol of social status. But if not long ago banks gave out loans easily, today due to economic problems the conditions have become much tougher.
Unfortunately, all over the world, mortgages can be both a dream tool and a trap that can easily fall into if you don’t consider the risks. And even in the richest countries, it does not always guarantee peace.
As you can see, a mortgage in Ukraine today resembles a struggle for survival, rather than a dream of a comfortable life. Instead of a chance for stability, it offers a financial risk with an unpredictable ending. High interest rates, an unstable economy and war turn every loan agreement into an act of desperate courage. Yes, a mortgage can be the only way out for those who have lost everything, but are Ukrainians ready to pay such a high price for the dream of their own home? Everyone is looking for the answer themselves, but one thing is clear: without real reforms and stability, this dream will remain only a paper illusion for many.
