Government to pull plug on home savings support

Analysis

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Under a plan submitted by Erik Bánki of the governing Fidesz, the government is planning to end state support of the home savings support system, in order to redirect the funds towards the Home Purchase Subsidy Scheme for Families (CSOK), according to a document on parliamentary website parlament.hu.

"The state has been supporting home savings accounts for more than 20 years; however, this form of savings does not adequately serve the aim of creating homes, while the service providers realize extra profit on a part of the state support," the document says.

Bánki said in the justification of the bill that deposits in home savings banks make up just one-third of all state-subsidised savings, but eat up three-quarters of total state subsidies on savings.

"Because of the typically small amount [saved] in the construction, few homes are built from the savings. In a number of cases, the savings donʼt even go to home purchases, because they can also be used for the construction of a swimming pool or sauna when the contract matures," state news agency MTI cited Bánki as saying.

The proposal aims to modify the original legislation from 1996 in a way that would essentially abolish state support for accounts opened after the acceptance of the proposal. Existing accounts would not be affected by the modification of the law.

The proposal criticizes the four home savings service providers for realizing an extra profit of HUF 60 billion since 2010, due to the state subsidizing the scheme.

The document explicitly says that the current funds for the home savings accounts will "provide financial cover for the further expansion of the Home Purchase Subsidy Scheme for Families, among other uses."

Fundamenta Lakáskassza, Hungaryʼs biggest home savings bank, had total assets of HUF 483.4 bln at the end of last year, data compiled by the National Bank of Hungary (MNB) show. The home savings arms of OTP Bank had total assets of HUF 325.2 bln, while Ersteʼs home savings bank had total assets of HUF 75.1 bln.

According to Hungarian news portal Index, the government wants to adopt the law as quickly as possible. Despite the fact that it was submitted only today, Parliament is likely to vote on the proposal tomorrow, Index reports.

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