Economy 3 May 2024, 3:50pm

Hungary reaches historic record at household loans, gov't move fails to work for companies

Portfolio

Hungarians have taken out the largest amount of home loans in March 2024 since June 2022, and personal loan borrowing has reached a new historic high. However, the interest-free corporate loans introduced at the initiative of the Economy Ministry at the beginning of the year have not worked out, and corporate lending has not yet taken off. We will analyse the outlook at Portfolio's Lending 2024 conference on 14 May, it is worth registering for the event!

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The National Bank of Hungary (MNB) published the March 2024 statistics of the Hungarian credit and deposit market on Friday morning. The figures show the continuation of the retail credit boom that started in recent months: the new contracted amount of housing loans was HUF 98 billion, personal loans HUF 57 billion and baby loans HUF 20 billion.

Our table below shows the respective annual increases (more than doubling for home loans), but perhaps more importantly, home loans have never reached such a high contract amount since the period of the central bank's Green Home Programme (Zöld Otthon), June 2022 to be precise, and personal loans have never reached such a high contract amount.

It slightly spoils the party for the banks that it is not the number of borrowers that has increased so much, but rather the average loan amount. The number of new home loans rose by "only" 37% in a year, personal loans by 11%, while the average loan amount jumped by 71% and 14% respectively.

The average amount of housing loans rose to HUF 16.5 million in March, owing also to the family housing subsidy CSOK Plus, the average amount of which reached HUF 26 million. Meanwhile, the average amount of personal loans was HUF 2.5 million.

Thanks to the CSOK Plus of up to HUF 50 million, the share of subsidised loans has increased from 21% a year ago to 29%, but this includes subsidised loans for village CSOK.

The exact contractual amount of the CSOK Plus so far can paradoxically be deduced from the interest period statistics, because the transaction interest rate of the CSOK Plus varies every year for the first two years (the client pays a fixed interest rate), so it is considered in the statistics as a variable rate, which is not the case for market loans. On this basis, the number of CSOK Plus contracts was negligible in January, HUF 13 billion in February and HUF 26 billion in March, the latter representing 27% of the total contracted amount of housing loans.

Meanwhile, the average interest rate on market housing loans continued to fall, to 6.47% in March, broadly in line with the level still seen in bank offers, but there is little prospect of a further decline, and even a rise is possible as the yield environment rises.

While the average APR on housing loans was 7.4% (this figure is distorted upwards by the interest rate subsidy on subsidised loans, which is not paid by the customer), it stood at 18.3% in March in the case of personal loans. This change in the cost of credit for personal loans represents only a small decrease from 19.0% a year earlier.

Overall, Hungarian households' liabilities to banks increased at a moderate pace of 3.9% over a year, standing at HUF 10,262 billion at the end of March. The stock of housing loans increased by 3.6% to HUF 5,101 billion, but if the momentum seen at the beginning of the year continues, these percentage changes will be much higher this year.

Meanwhile, March was a slow month for retail deposits, but the good news is that households deposited HUF 97 billion more than they withdrew.

We find meaningful changes almost only on demand accounts, with banks paying only 1.8% on average on fixed retail forint deposits, compared to 6.6% for companies, just before the abolition of the corporate deposit interest rate cap.

Households' deposits have started to grow again in recent months, rising by 1.4% year-on-year in March, while the annual increase for companies is now 7.5%.

In corporate lending, the government had high hopes for the interest-free forint loans introduced at the initiative of the Economy Ministry at the beginning of the year, which companies could borrow at the interest rate corresponding to the current BUBOR between 1 February and 30 April for the first six months of the maturity period.

However, according to MNB data, in the first two months of the "promotion", companies signed only HUF 47 billion in variable-rate forint loans, which was barely one tenth of their total new loan volume.

As in February, companies repaid more loans than they borrowed in March, so on a transaction basis the stock of loans to companies has already fallen by nearly HUF 250 billion this year.

On a year-on-year basis, however, we still see a 4.2% increase in corporate loan growth, thanks to the revaluation of the forint due to its weakening, and firms have borrowed some HUF 300 billion more than they have repaid in the last year.