Hungarian gov't insists on keeping voluntary APR cap on housing loans
Highlights of Máté Lóga's address:
We are already witnessing a recovery and a normalisation in retail lending, but for companies we can only speak of the dissipation of the cautionary motive in the credit market.
The total monthly value of new home loan contracts is slowly approaching its average level in 2022, with the monthly contracted amount of market loans reaching pre-Covid levels in recent months.
Corporate lending has shifted towards foreign currency lending, while various subsidy programmes have provided a major boost to domestic corporate lending.
Contracted amounts have more than doubled on a year/year basis since January 2023, and the monthly contracted amount of subsidised housing loans has been rising steadily.
However, for corporate lending, forint loan transactions continue to perform poorly, with the government's surveys suggesting that they are postponing investments mainly due to high interest rates and the weakening European economic environment.
Demand for SME subsidy programmes is steady and Garantiqa's guarantees help SME lending, reducing the cost of borrowing for SMEs by up to 30-50 basis points. The share of new loan contracts accounted for by loans under the Baross Gábor Loan Programme is significant.
The SME loan portfolio is stagnating, with the Széchenyi Card Programme taking the place of the expiring FGS (Funding for Growth) portfolio.
The yield environment and the cautionary motive are both important determinants of lending, with many companies postponing investments due to weak export markets.
At the same time, the economy has seen a number of positive developments: real wage growth, a rebound in consumption, an increase in industrial sales, rising investment in productive sectors, and rising corporate profits.
Achieving the 4% growth target next year will be necessary to take the wind out of the cautionary motive.
The interest rate freeze has protected SMEs from the negative effects of the rising yield environment, and the phasing out of the SME interest rate cap has not created additional burdens or problems for SMEs.
SME lending has benefited from the waiving of interest rate spreads, which was made possible from the beginning of February until the end of April in cooperation with banks. The government would evaluate this instrument and start a dialogue on how it could be continued.
For housing loans, the voluntary APR cap, currently set at 7.3%, is essential and the government wants to maintain it in order to maintain the momentum of mortgage lending.
Cover photo: Márton Mónus / Portfolio
