It is difficult to explain why mortgage rates are so low in Hungary - Radován Jelasity

Radován Jelasity said, among other things:

We have been through a challenging period, but the economic situation is improving steadily, as is business and consumer confidence,

The turnaround in the trend of residential real estate lending occurred in the last quarter of 2023, with the sector now lending around HUF 100 billion per month,

The banking sector has rushed ahead a bit on the assumption that inflation will not be so sticky. A few months ago, the question was not whether interest rates would fall at all, but when and how much.

it is difficult to explain to bank controlling why housing loan rates are so low while government bond yields are higher, but we hope that the downward trend in interest rates will continue.

The spectacular start of the [updated family housing subsidy scheme] CSOK Plus has also contributed to the housing credit boom, which is approaching HUF 30 billion per month, while real wage growth has also boosted household savings,

In SME lending, interest rates have contributed significantly to the downturn of the market, with 47% of SME loans disbursed since the beginning of 2020 being subsidised loans, with very few countries having such a high share of subsidised loans,

The corporate market's interest rate differential between HUF and EUR loans is slowly but surely closing up.

All surveys show that companies do not think that lending is the main obstacle to investment growth. The spread-free lending linked to BUBOR has not delivered the expected results, although the banking sector would have been happy if it had.

The profit adjusted for dividend income and revaluation effects in the banking sector was HUF 827 billion last year, representing a return on equity (ROE) of 10.8%, which few investors find attractive given the risks in the banking sector, and if only dividend income is adjusted, the ROE is 16%.

Profit is a good thing, and we have lived in a world where it was not important - it was not pleasant.

Key among the challenges are

• the risk of stubborn inflation,
• fragile consumer confidence and
• a slow pick-up in investment.

Cover photo: Portfolio