Economy 17 October 2022, 2:20pm

Minister reveals number of Hungarian households affected by interest rate freeze

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From 1 November, the government will extend the interest rate freeze to mortgages with 3 and 5-year interest periods, and extend the measure until 30 June 2023, a law amendment published in the Official Gazette showed last Friday. The Minister of Economic Development revealed in a statement on Monday the number of borrowers that will be affected and also shared details on how.

We last wrote a detailed analysis of the extension of the interest rate freeze a month ago. The cap was introduced at the end of December 2021 so it will have been with us for 18 months by the middle of next year.

So far, the government has been helping borrowers with mortgage contracts tied to the benchmark rate, i.e. those with an interest period of 3, 6 or 12 months (but in any case below 3 years) and typically tied to BUBOR (or, less frequently, the ÁKK yield), by freezing interest rates. However, the current regulation introduces a significant change in the scope of eligibility, offering support to borrowers with 3 and 5 year interest period mortgages with market interest rates (not subsidised) with this amendment. In addition, there are also mortgages with a 10-year, 15-year or fixed-rate mortgage, but these are not affected by the current relief.

The effect of the months of interest rate hikes, which were cranked up drastically last Friday, is naturally being felt on the credit market. The 14 Oct mammoth monetary tightening effectively paves the way for the emergence of forint rates around 20% and a consequent sharp fall in the market for market-rate forint loans.

According to a statement released by the Ministry of Economic Development today, the interest rate freeze

is protecting 350,000 families from interest rate rises;
there are 284,000 borrowers already covered by the interest rate freeze, i.e. they are affected by the extension of the deadline;
there are 66,000 borrowers to whom the measure now applies, as the scope of the freeze was also extended.

The government calculates that

THE INTEREST RATE FREEZE WILL LEAVE HUF 80 BILLION IN THE POCKETS OF FAMILIES IN 2022, AND MORE THAN HUF 60 BILLION IN THE FIRST HALF OF 2023.

Thanks to the interest rate freeze, an average family will save HUF 282,000 in 2022, and in the first half of 2023 the amount they will not have to pay in interest will be HUF 174,000, the government said.

IN THE FIRST HALF OF 2023, WITHOUT THE INTEREST RATE FREEZE, an AVERAGE FAMILY'S REPAYMENTS WOULD RISE BY 55%.

Once the interest rate freeze has been phased out, interest rates will revert to the levels set in the contracts. The decision is also beneficial for the financial sector, as defaulting loans would pose a serious risk for all players, said Márton Nagy.