Economy
Hungary to offer preferential mortgages to civil servants, armed forces
The government allegedly discussed a proposal before Christmas to offer mortgages at preferential, state-subsidised rates to civil servants, the armed forces and law enforcement, on more restrictive terms and conditions than regular mortgage loans, Monday's Népszabadság claimed.
Preferential mortgage rates would be available to those in permanent employment and no residential property to their name. Monthly mortgage payments would be capped at 30% of the debtor's salary. Those who have participated in the scheme would not be eligible a second time. The two versions of the plan being discussed include one that would limit the value of the property being purchased at HUF 30 million for new homes, HUF 20 million for pre-owned, and HUF 15 million for upgrades to an existing home. The second version of the plan would cap the value of the acquisition at HUF 18 million or HUF 19 million regardless of how it is used.
In the first version, the mortgage principal would be limited to HUF 15 million when purchasing a new home, or HUF 10 million for pre-owned homes or home upgrades. In the second version, the mortgage principal limit would be drawn at HUF 15 million irrespective of the type of home purchase or improvement. In this second version the preferential loan could also be used to pay off an existing mortgage with a higher interest rate.
Allegedly, a state guarantee would be made available to help borrowers raise the necessary down payment for the loan.
In the first version, the loan would be extended by banks, the state would subsidise the interest rate, which puts the total cost to the central budget at HUF 80 billion, assuming 40,000 to 50,000 applicants and HUF 7 million average loan principal.
In the second version, the Student Loan Centre would issue government bonds to raise the funds required for the scheme. At 0% interest the bonds would be purchased by the National Bank of Hungary. A total of HUF 300 billion in bonds would have to be issued by the year 2020.
Those leaving civil service or defaulting on debt would be automatically switched from a preferential interest rate to a regular one. In the event of retirement or death the preferential interest rate would remain unchanged (i.e. the loan would be inheritable).
Preferential mortgage rates would be available to those in permanent employment and no residential property to their name. Monthly mortgage payments would be capped at 30% of the debtor's salary. Those who have participated in the scheme would not be eligible a second time. The two versions of the plan being discussed include one that would limit the value of the property being purchased at HUF 30 million for new homes, HUF 20 million for pre-owned, and HUF 15 million for upgrades to an existing home. The second version of the plan would cap the value of the acquisition at HUF 18 million or HUF 19 million regardless of how it is used.
In the first version, the mortgage principal would be limited to HUF 15 million when purchasing a new home, or HUF 10 million for pre-owned homes or home upgrades. In the second version, the mortgage principal limit would be drawn at HUF 15 million irrespective of the type of home purchase or improvement. In this second version the preferential loan could also be used to pay off an existing mortgage with a higher interest rate.
Allegedly, a state guarantee would be made available to help borrowers raise the necessary down payment for the loan.
In the first version, the loan would be extended by banks, the state would subsidise the interest rate, which puts the total cost to the central budget at HUF 80 billion, assuming 40,000 to 50,000 applicants and HUF 7 million average loan principal.
In the second version, the Student Loan Centre would issue government bonds to raise the funds required for the scheme. At 0% interest the bonds would be purchased by the National Bank of Hungary. A total of HUF 300 billion in bonds would have to be issued by the year 2020.
Those leaving civil service or defaulting on debt would be automatically switched from a preferential interest rate to a regular one. In the event of retirement or death the preferential interest rate would remain unchanged (i.e. the loan would be inheritable).
