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Although interest rates are generally rising in Hungary in tandem with similar European trends, the Hungarian central bank’s statistics shows that average borrowers can already borrow at a lower rate than the standard interest rate advertised, writes Index.hu.
In the race to attract a dwindling number of customers, banks are offering individual interest rate discounts to help them achieve a repayment rate that still allows them to conclude a loan.
According to data from the Hungarian National Bank (MNB), in June this year, banks were lending at an average interest rate of 6.42% for a 10-year fixed repayment. However, the best market offer housing loan at the end of May 2022 had a higher interest rate of 6.54 percent. If we compare the central bank’s true average with the top offer at the end of June, 6.8 percent, the difference is even more striking. In November last year, when bank mortgage interest rates started to rise, the average interest rate on loans disbursed at 4.14 percent was still 60 basis points higher than the top rate at the end of October.
The fall in the average interest rate on loans below the announced levels is a sign that domestic banks are trying to maintain a declining demand for housing loans due to inflation and previous interest rate hikes. An important means of doing this is that banks are increasingly offering advertised or individual interest rate discounts to customers interested in taking out a loan.
The main issue is that an increasing number of customers are faced with the fact that their monthly income is simply not enough to borrow the desired amount due to the central bank’s credit freeze rules. Either the amount requested has to be reduced or a loan-partner has to be involved in the transaction. Another solution is to compare bank offers and maximize the interest rate discount(s). These can save you up to HUF 10,000 a month in repayments.
Despite all this, interest rate rises could accelerate in the coming weeks, as the benchmark rate has risen from 6.45 percent at the end of May to 10.75 percent today, thanks to the MNB’s rate hikes in June and July. Banks will have to increase the cost of their loans to a significant extent.
On 1 August, MKB and Takarékbank raised their rates. The rate hike was 19 basis points for a 5-year interest period and 0.25 percentage points for a 10-year or fixed repayment until the end of the term. The most favorable interest rate in the two banks was 7.24 percent, which requires a loan of at least HUF 24 million at the most favorable interest rate.
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