Bank of Russia Cuts Rate to 16%: How Loans and Mortgages Will Change in 2026

Photo: Domclick

In December, the Bank of Russia for the fifth consecutive time cut the key interest rate — from 16.5% to 16%. This decision became the regulator’s final move in 2025. It was taken against the backdrop of slowing inflation and weaker credit activity; however, the impact of this step on future lending conditions will depend on how the financial sector responds.

Macroeconomic Trends Exceed Expectations

The Central Bank explained the decision by the economy’s return to a more balanced growth trajectory. Following the meeting, the regulator pointed to a slowdown in current price growth to 4.6% year on year in October–November and expects annual inflation to come in below 6% by the end of 2025. Zhanna Smirnova, Director of Macroeconomic Analysis at Bank DOM.RF, noted that macroeconomic data are indeed shaping up better than expected, although inflation risks persist. The upcoming VAT increase and a reduction in foreign currency sales on the market could intensify inflationary pressure and weaken the ruble, factors the regulator will have to take into account in future rate decisions.

Gazprombank’s Chief Economist Pavel Biryukov drew attention to structural changes in the economy that strengthened the case for policy easing. He pointed to slower credit growth, a narrowing gap between supply and demand, and stabilisation in the labour market. Another supporting factor was the recent strengthening of the ruble, which also reinforced the decision to cut the rate.

Bank Interest Rates: New Adjustments

Mortgage lending has reacted most visibly to the Central Bank’s decision, although changes remain moderate for now. According to the Banki.ru database, from the regulator’s October meeting through mid-December the average market mortgage rate declined from 21.8% to 21.4% per annum. By comparison, rates on consumer loans edged down only from 27.8% to 27.6%, while auto loan rates slipped from 25.4% to 25.2%. According to DOM.RF, over the course of 2025 market mortgage rates have already fallen by almost 8 percentage points — from 29.3% to 21.3%.

Sberbank was among the first to respond to the key rate cut. From 22 December, rates on unsecured consumer loans were reduced, with the minimum set at 19.4%. From 25 December, the maximum discount on base mortgage programmes for property purchases via Domclick increases from 1% to 1.5%, bringing minimum rates down to 15.9% for the primary market and 16.5% for secondary housing. At the same time, deposit conditions remain unchanged, with the maximum rate held at 16% per annum at least until 5 January 2026.

Expert Opinions

Many experts believe that the effect of the Central Bank’s decision for borrowers will be limited. Inna Soldatenkova, Head of Expert Analytics at Banki.ru, emphasises that credit accessibility will not increase significantly, as lending conditions are shaped not only by the regulator’s actions but also by macroprudential restrictions and rising overdue debt in bank portfolios.

Mikhail Vasilyev, Chief Analyst at Sovcombank, believes that rates will gradually decline in line with the key rate, but will remain elevated for a prolonged period. He advises borrowers to carefully plan their financial burden and consider refinancing options in the future.

T-Bank also does not expect any significant changes in mortgage conditions in the near term, noting that rates depend on long-term expectations and high market volatility, which forces banks to price in additional interest rate risk. Andrey Smirnov, a stock market expert at BCS World of Investments, stresses that even if the key rate falls to 12%, mortgage rates could still remain at 15% or higher. He cites high household indebtedness and tighter regulation as the main constraints, meaning that credit accessibility will improve much more slowly than rates decline.

Conclusion

Analysts at International Investment note that the Bank of Russia’s December decision creates conditions for a gradual easing of the credit environment, but does not fundamentally change the situation in the borrowing market. Even if the key rate continues to decline, banks are likely to pass this effect through to end rates cautiously due to ongoing macroprudential constraints, stricter borrower requirements, and the need to account for credit portfolio quality. This means that lower rates will take time to materialise and will not lead to a rapid increase in loan accessibility.

In the medium term, dynamics will be shaped not only by the trajectory of monetary policy, but also by inflation expectations, labour market conditions, and real household incomes. An additional source of uncertainty remains the external environment — EU and US sanctions policy, the impact of which continues to affect financial flows, the ruble exchange rate, and investment activity.