Banks make case for ending mortgage rate freeze

Banking

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The Hungarian Banking Association argued for ending a temporary freeze on floating mortgage rates in a statement issued after their annual general meeting on Friday, according to a report by state news wire MTI.

The government froze rates on floating-rate mortgage loans at October levels for a period of six months from January. National Bank of Hungary policymakers have suggested that a targeted extension of the temporary freeze may be worth considering.

In the statement issued Friday, the association acknowledged that the policy measure protects consumers from inflation in the short term, but warned that maintaining the freeze in the longer term "will create imbalances" and "divert funds from other areas".

"A return to market conditions is desirable for real economic growth and competitiveness," the association said.

"Under the current circumstances, the stability and intermediation role of the banking sector must also be further strengthened to ensure economic development," it added.

In cooperation with the government and the NBH, the association said it is "confident" the sector "will be able to continue to act as a solid driver of economic growth".

"Such a co-operation could increase the country's ability to attract capital, further strengthen confidence in banks, and, together, these factors could improve the country's international position, leading to a more appropriate rating," it added.

Close to half a million borrowers are affected by the mortgage rate freeze.

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