Foreign currency mortgage borrowers take part in a rally over ruble against banks in Moscow, Russia

When they took out a mortgage on a small two-room apartment seven years ago, Oksana Li and her husband hoped to make a new home for themselves and their young son.
Now, like thousands of other Russians, they are seeing that dream unravel as they are unable to make payments - even by working longer hours and a second job.
That's because they are part of a minority of Russians who took out mortgages denominated in a foreign currency to take advantage of lower interest rates abroad. As Russia's currency collapsed in recent months, the cost of repaying those mortgages has gone through the roof.

 Foreign currency mortgage borrowers take part in a rally against banks in Moscow, Russia. Photo / AP

"In November, we gathered my entire monthly salary and that of my husband and took it to the bank, but the sum was still not enough to cover the new monthly payment," said Li, a 35-year-old office manager whose mortgage is in Swiss francs.
When the Li family took out their mortgage in 2008, their monthly payment was equivalent to 38,000 rubles. By the end of 2014, it was 129,000 rubles.
Taking mortgages in a foreign currency was an accepted practice in countries like Russia before 2008. The borrower gained by enjoying the interest rates of the country whose currency the loan was denominated in. Switzerland's main interest rate, for example, is now near zero, while Russia's is at 17 per cent.
But the benefits of the cheaper rates come at the risk of fluctuations in the currency. In the case of Li, her monthly payments have more than doubled as the ruble fell by half since last year.
The percentage of Russian mortgages that are currently denominated in dollars, euros or other foreign currencies is only about 3.5 per cent, according to banking analysts. But that is still tens of thousands of mortgages.

The All-Russia Mortgage Borrowers Community, which was founded on a social networking site in late November, claims that at least 250,000 people live in homes covered by foreign-currency mortgages.
Selling the property is not a solution. Since the homes are based in Russia, they would be sold in rubles, whereas the debt remains in a foreign currency. That leaves the mortgage holders in so-called negative equity.
"Many people find themselves in a situation where the price of the apartment does not cover all of the debt," said Yuri Yufyakov, a real estate agent in Moscow.
Li said that if they do not cover their mortgage payments for three months, the bank can take their apartment back.
She said that's all the more difficult to stomach because of the sacrifices she and her husband had made to hold onto the apartment.
"We pinched and saved, forgoing vacations, sick leaves and any nights out," she said. "I personally worked 12 hours a day and my husband had two jobs." She lamented that they had not spent enough time with their son, now 12.
Li was among about a dozen people who held a picket on a recent Sunday in St. Petersburg. To avoid possible police detention, they stood one at a time in the cold.
On the same day in Moscow, where the protest was sanctioned, as many as 2,000 people joined the rally.
Sergei Ignatyev, coordinator of the group of mortgage holders in St. Petersburg, said they are demanding that banks convert the mortgages to rubles at the rate as of Jan. 1, 2014, when the Russian currency was trading at about 32 to the dollar. The ruble on Tuesday was trading at 63 to the dollar after hitting 80 in mid-December.
Russia's energy-dependent economy has suffered a severe shock over the past few months, largely because oil prices have tanked. Western sanctions over Moscow's course on Ukraine also have had a negative effect, particularly on the banks.

A protester holds a banner reading "Foreign currency mortgages - SOS" during a rally against the banks and the growth of the dollar in central Moscow. File photo / AFP
Ignatyev said the banks would be unable to solve the problem unless the Russian Central Bank gets involved. The Central Bank, while insisting it has no right to interfere, issued a statement in December saying it would be in the interests of both the banks and their customers to restructure the mortgages and convert them into rubles at a "reasonable rate."
The protests appear to have gotten the government's attention. Russia's parliament is expected to take up legislation to address the situation when the long New Year and Orthodox Christmas holidays end on Monday.
Some mortgage holders decided not to wait and have managed to convert their debts from foreign currency into rubles, albeit at unfavourable rates.
St. Petersburg couple Dmitry Dervenyov, 50, and his wife Svetlana Suvorova, 32 , reached an agreement with their bank in December to convert their 15-year, dollar-denominated mortgage into rubles at a rate that still doubles their payment compared with the start of 2014. On the plus side, they are protected from any further increases and can plan ahead.
"At least now we have hope that we will not lose the apartment," Suvorova said.
-AP