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Government announces home grants and interest rate subsidy program

Sustainability

The government will reintroduce home-acquisition grants for families with children and plans to provide an interest rate subsidy for forint home loans in 2012, National Economy Minister György Matolcsy announced on Wednesday.

Matolcsy said that the government would allocate HUF 5.2bn for the home grant program for families and HUF 1.3bn for the planned interest rate subsidy provided for forint-denominated home loans from next year's central budget.

The interest rate subsidy program must receive European Commission approval in order to come into effect.

The grant will support the purchase or the construction of homes of families with at least two children, and will be available to families which do not own a home. The grants will be paid retroactively, and will not be available for luxury homes.

Families with four or more children would be eligible for a grant between HUF 1.6m-HUF 2.5m, while those with three children would be eligible for HUF 1.2m-HUF 2m in support. Those with two children would be eligible for HUF 800,000-HUF 1.3m in support. The size of the grants will also depend on home size, energy efficiency and will require that at least one of the people applying for the grant have had an officially registered place of employment for a period of at least six months. Those who owe back taxes will not be eligible for the grants.

The economy minister said the government expects to disburse such grants to 4,000 families next year beginning on January 1.

In another new measure the government plans to provide an interest rate subsidy to forint-denominated loans granted for the purchase or construction of new homes, for the purchase or resale homes as well for energy-efficiency home improvements.

The interest rate subsidy will also be available for the purchase of homes burdened with overdue or cancelled mortgages and for those with overdue mortgages who purchase smaller homes.

Matolcsy said that this would reduce interest expenses by at least one-third from the current amount.

Borrowers may apply for the subsidized-rate loans until the end of 2014. The subsidized rates will be available for the purchase/construction of homes worth no more than HUF 30m. The limit is HUF 15m for the refurbishment of resale homes, a statement on the scheme published on the ministry's website show.

The interest rate subsidy is available for a maximum of five years, and it will range from 30% to 70% of the applicable government security yields, with the actual size falling gradually to between 30%-50% in the fifth year.

The subsidy will be bigger for the purchase or construction of new homes, and will also be higher for families with three or more children.

The government expects 3,000-5,000 families to take advantage of the interest rate subsidies next year. The program will be extended in 2013 if it proves successful, Matolcsy said.


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