The Agency for the Protection and Development of Competition (APDC) has proposed restricting the activities of Otbasy Bank JSC in the mortgage lending sector. The bank plans to only be allowed to issue loans within the framework of state programmes.
This emerged from the APDC's report on the state of competition in commodity markets for 2023. The mortgage market over this period was characterised as “highly concentrated with underdeveloped competition”.
The dominant position among banks is held by Otbasy Bank JSC, Bank CenterCredit JSC, Bereke Bank JSC and Freedom Finance Kazakhstan Bank JSC.
“At the same time, Otbasy Bank JSC holds a dominant position in the residential mortgage lending market outside of state programmes, i.e., it has the ability to control this market and exert significant influence on general conditions”, the statement said.
Following the analysis, the APDC proposed sending recommendations to the National Bank, the Agency for Regulation and Development of the Financial Market, the Ministry of National Economy, and the Ministry of Finance regarding the adoption of the following measures:
- Introducing targeted mortgage loan subsidisation, based on the borrower's social status. Mortgage subsidisation should be directed to borrowers directly, bypassing banks. Banks should only offer market rates and should compete with each other.
- Legislatively enshrining the use of citizens' lump-sum pension payments from the UAPF as a targeted deposit for improving housing conditions in second-tier bank accounts, which would provide citizens with the opportunity to accumulate money in any second-tier bank (STB) on more favourable terms.
- Introducing an amendment to the Tax Code to reduce individual income tax for consumers of mortgage loans from second-tier banks on the portion of interest repayment on housing loans from wages.
- Introducing a mechanism for state participation in the down payment - “twin mortgage”. The first loan is issued by the state for the down payment to a person belonging to a social category, and the second loan is issued by the STB for the remaining cost of the housing. The state then “freezes” the issued loan. The consumer deposits the loan-funded down payment into the commercial bank where they plan to take out the mortgage. Afterwards, the consumer first repays the mortgage instalments to the commercial bank. Only after completing these payments do they repay the down payment amount to the state. The interest rate on the down payment loan should be significantly lower than the commercial bank's mortgage rate.
- Reducing the share of interim and preliminary loans and removing Otbasy Bank JSC from the commercial segment of this market (outside state programmes).
- Establishing fixed prices for housing within state mortgage programmes.