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Banking Association welcomes tighter mortgage lending rules

MNB

Jessica Fejos

The Hungarian Banking Association (MBSz) has welcomed plans by the National Bank of Hungary (MNB) to lower statutory debt-to-income ratios for mortgage borrowers who donʼt take out loans at rates fixed for a period of at least ten years, state news agency MTI reports today.   

As reported Monday, the MNB plans to tighten its debt-to-income ratio rules for mortgage loans to help reduce the exposure to interest rate risks of households. The central bank is endeavoring to avoid a repeat of the credit catastrophe that preceded the last major financial crisis by reducing the proportion of variable-interest loans and pushing borrowers towards fixed-interest credit.

"The banking sector welcomes all regulatory efforts that reinforce predictability for consumers when they take financial decisions," MBSz Secretary General Levente Kovács told MTI.  "Putting fixed-rate loans at the forefront naturally points in this direction looking at the coming years," he added.

The MNB said it would lower the debt-to-income thresholds for mortgage borrowers whose loans have rates fixed for fewer than five years to 25%, and to 35% for loans with rates fixed for periods of at least five years but fewer than ten years. The thresholds apply to households with steady monthly net incomes of below HUF 400,000.

For households with higher incomes, the respective limits are 30% and 40%.

The MNB left the debt-to-income thresholds for mortgage loans with rates fixed for at least ten years unchanged at 50% and 60% for households with respective net income below and over HUF 400,000. 

The draft regulation is currently subject to comments by the European Central Bank (ECB), after which the changes may enter into effect from October 1, 2018.

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