Parliament votes to phase out subsidies on home savings bank deposits

Sustainability

Az expected, Parliament voted on Tuesday to phase out state subsidies on deposits at home savings banks. The motion was passed in an expedited procedure with 125 votes for, 49 against, and no abstentions, state news agency MTI reported.

The bill was submitted a day earlier by Erik Bánki, an MP of governing party Fidesz and chairman of Parliamentʼs Economic Committee. 

Presenting the bill on Monday, Bánki said the subsidy on home savings bank deposits - 30%, up to HUF 72,000 a year - had not served the purpose of supporting home construction effectively recently, while home savings banks had pocketed "extra profit" from the subsidy system.

As indicated earlier, the proposal does not affect existing contracts, on which subsidies will be paid until the deposits mature. Earlier Tuesday, it was reported that service providers were experiencing a late rush for home savings accounts, with clients aiming to open accounts before the end of state support for the scheme.

Bánki repeated in the justification of the bill that the subsidized home savings bank deposits have become "inefficient" and "expensive to the state and the taxpayer."

Without the subsidies - expected to reach more than HUF 70 billion this year - the yield on deposits in home savings banks would be negative, Bánki said. At the same time, he added, home savings banks are lining their pockets, booking almost HUF 60 bln in extra profits since 2010. 

Bánki noted that more than 90,000 Hungarian families have availed themselves of HUF 250 bln in grants within the framework of the Home Purchase Subsidy Scheme for Families, known by its Hungarian acronym "CSOK," since the groundwork was laid for the program late in 2015. 

Impact expected only in short term - Duna House

Meanwhile, MTI also reported on Tuesday that listed real estate broker Duna House has said that although the governmentʼs decision to phase out state subsidies on home savings deposits may have a short-term negative impact on earnings, the company is standing by its guidance.

In a notice posted on the website of the Budapest Stock Exchange (BÉT) late Monday, Duna House said the measure "might have a short-term negative impact" on consolidated results.  

"Management is confident, however, that despite the expected negative impact it is able to achieve its profit guidance for core operations (excluding MyCity residential developments) for the current year, and deliver further profit growth in core operations next year, as well," it said. 

Duna House noted that the sale of home savings bank products had added HUF 68 mln to its gross margin in the first half of 2018. Duna Houseʼs consolidated H1 gross margin came to HUF 2.17 bln, it added.

Duna House observed that the end to subsidies on home savings may have a positive side, too.  

"The expected changes in legislation might bring consolidation to the loan brokerage sector over the mid or long term, whereby the company’s market share of mortgage loans might increase, offsetting partly or completely the loss in revenues," it explained.

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