Official: Home savings may be used for building society contribution

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The new home purchase subsidies introduced by the Hungarian government for families, as well as deposits made previously by Hungarians at home at savings banks, may be used as contributions to national home building societies (NOK), state secretary Csaba Dömötör said, Hungarian news agency MTI reported today.

Speaking during a program on Hungarian state-owned Kossuth radio, Dömötör said the elements combine well to support the construction of new homes. 

Parliament approved legislation on Thursday paving the way for the establishment of national building societies, based on a model similar to those found in the UK. Members of the societies make contributions to the mutual organization and are selected – based either on the size of their contributions or through a lottery – to receive a ten-year interest-free loan when they have enough saving to make a 20% down payment on a new home. The state matches 30% of the contributions with a subsidy up to an annual HUF 300,000.

Dömötör dismissed criticism by the opposition that the societies are nothing more than group purchase pyramid schemes. While the point of a pyramid scheme is to continually recruit new members, membership in building societies is closed when one is established, he explained. Though the order in which members receive loans is determined by bid or lottery, all members will receive a loan by the end of the societiesʼ ten-year runs, he added.

Organizers of the societies are not covered by the National Deposit Fund, but they must have HUF 100 million in share capital and meet a 3% reserve requirement, Dömötör said. Managers of the organizers must comply with strict rules prohibiting conflict of interest, and the National Bank of Hungary (MNB) has been tasked with oversight of all of the organizersʼ operations.

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