BREAKING NEWS: Hungary c.bank asks for moratorium also on retail loan repayments
In a bid to mitigate the impact of the coronavirus (COVID-19) pandemic, the central bank has on Wednesday called on lenders to adopt a repayment moratorium on retail loans, as well. The request comes after it urged commercial banks to do do same for businesses earlier this week.
The bank "threatened" the banks that if they do not budge, the MNB will ask the government to adopt legislation that will enforce the moratorium.
In order to make sure households can weather their temporary liquidity disturbances, the MNB wants to see a significant reduction of the average annual percentage rate (APR or THM in Hungarian). In January 2020, the APR was 4.4% on housing loans (down from 5.3% a year earlier) and 13.4% on personal credit (down from 13.8%).
The APR on personal loans should not exceed the base rate (0.9%) by more than five percentage points, the bank said. It also wants banks to revisit their general lending practices, the caps on loans and their interest costs.
The central bank had already announced emergency measures on Monday to shore up the economy against coronavirus fallout, widening the range of collateral it accepts from banks and urging lenders to apply a loan repayment moratorium for stricken firms.
The MNB wants the loan repayment moratorium (both on cororate and retail loans) to remain in effect until the end of this year.
The MNB also said it was considering restarting its mortgage note buying programme, which would provide more long-term liquidity for the banking system and reduce the financing costs of household loans. The bank has also been injecting forint liquidity into the banking system via fx swaps since Monday on a daily basis.
The central bank is also asking banks to refrain from fee and commission hikes as penalty for late repayments in the case of accounts and loan products where pricing is linked to the size of transfers made to the customer's bank account.
As regards exisiting housing loans, the MNB wants banks to offer borrowers a switch to Certified Consumer Friendly Housing Loans to achieve a lower interest premium and fixed interest for at least five years.
The MNB also wants banks and insurers to team up and offer low-cost, low-premium products that mitigate loan repayment risks, and in particular insurances for unemployment. Access to these products should be made easy.
Cover photo: Getty Images.
