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Fixed-rate home loans most popular, says OTP

Sustainability

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Nine out of 10 home loans granted in September carried a fixed rate, according to data from OTP Bank, with loans of longer interest periods the most popular in the fixed-rate category. However, due to new regulations introduced in October, the loan market may move even further towards long-term mortgage loans, OTP said in a press release sent to the Budapest Business Journal.

While fixed-rate home loans represented 63% of all applications at the beginning of the year, this rate had grown to 95% by September, the bank claims. Changes in trends can also be observed in interest periods, it adds. Earlier, the most popular category was loans with an interest period of less than five years. Today, the most popular loans are those with a 10-year fixed-rate period, as well as those which carry a fixed rate until the end of the loanʼs duration.

Since their introduction some 18 months ago, demand for certified "consumer-friendly" home loans has also been high. At OTP, two-thirds of new contracts are for such loans.

Changes in "debt brake" regulations entered into effect in early October, controlling the size of monthly payments in the case of home loans, in turn regulating how and to what extent the applicant can be indebted compared to their income. In the case of new, non-fixed rate loans, the monthly payment is limited to 30% of the applicantʼs net monthly income, while 5-year fixed-rate loans are limited at 40%. Due to lower risk, the limitation on 10-year (or more) fixed-rate loans stayed at 60%.

"The new debt brake regulations may help applicants with increasingly safe financial planning, which may result in demand being pushed towards loans of longer interest periods," notes Zoltán Kormos, head of OTP Bankʼs home loans division.

"For us Hungarians, real estate is our most important possession; we think of our own home as an indispensable part of a happy and independent life," Kormos adds. "Creating a home is decisive in everybodyʼs life, meaning that, in case we need money for the purchase, we have to turn to a financial institution which helps us as a reliable partner in making the right decision. Whatʼs more, apart from the products on the market, state-supported constructs are available as well. By choosing the right products, we can gets millions of forints closer to buying the home of our dreams."

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