Hungary's Home Start could boost house prices 15-20% in worst case scenario - central bank
Among other things, Ádám Banai spoke about the following in his presentation:
The MNB's traditional objectives with regard to the banking system remain unchanged: 1) to ensure its own stability and 2) to satisfy the funding needs of economic agents. Over the past decade, the MNB has taken significant steps to achieve this, and today we have a profitable banking system (with profits of HUF 1.589 trillion last year and HUF 760 billion in the first half of this year), ample free capital (over HUF 2.3 trillion) and a liquidity coverage ratio (LCR) of almost 170%. The banking sector could extend an additional HUF 20–30 trillion in loans.
Nevertheless, the credit market is still characterised by duality: while consumer loans are growing faster than the regional average, corporate loans have remained largely unchanged.
Banks' lending capacity is at an all-time high and they are willing to lend in line with the economic cycle.
One of the key questions for the near future is the outlook for the housing market. Even without the Otthon Start (Home Start) Programme, there has been a significant annual price increase of 16% (24% in Budapest) over the past year, which has greatly reduced the prospect of buying a home with a loan. According to estimates by the National Bank of Hungary, the annual growth rate of domestic household loans could rise to between 18% and 22% in 2026 as a result of the programme.
The most important question is how successful support for the supply side will be. If it is successful, there will be less pressure on the demand side. However, if it is less successful, the central bank will have to continuously monitor price increases, as these could also pose an increased risk to the financial sector.
They estimate that, if there is no significant change in the 'behaviour' of the housing supply,
there could be an additional price increase of 15–20% by the end of 2026.
This additional price increase may be higher in rural areas and lower in Budapest.
According to estimates by the MNB, between 90,000 and 125,000 public sector employees will be eligible for loan support from 1 January onwards, with the total value of loans involved amounting to around HUF 1.2 trillion.
The extent to which interest subsidies for corporate and retail loans contribute to the deepening of the financial sector is a big question. For instance, 78% of Hungarian companies claim that bank loans are irrelevant to them as a source of financing.
There is no sign of increased penetration in mortgage lending either, with the top income quintile taking out 62% of new mortgage contracts this year.
However, personal loans demonstrate that increasing digitisation can achieve higher credit penetration without significantly increasing risk.
The introduction of Certified Corporate Loans by the MNB, which makes borrowing simpler, could boost the corporate sector's credit dynamics and economic growth, both of which are currently lagging behind their potential.
Cover photo: Portfolio
