Parliament approves cap on APRs

MNB

Hungary’s Parliament approved a bill late Monday that caps the effective annual percentage rate (APRs) for most loans at 24 percentage points over the National Bank of Hungary (MNB) base rate, which is 6% at present.

The bill was passed with a vote 266 ayes and one nay.

Exceptions to the limit are made for high-risk, high-cost consumer loans and credit card loans. APRs for credit cards and consumer loans, excluding car loans, are capped at 39 percentage points over the MNB base rate.

The legislation caps APRs for the first half of the calendar year based on the central bank’s key rate on December 31 of the previous year and for the second half of the calendar year based on the MNB rate on June 30.

In the case of mortgage loans, lenders are allowed to peg the APR to a reference rate - the three-, six- or twelve-month BUBOR, or the average yield on three- or five-year government securities as calculated each month by the Government Debt Management Agency (ÁKK) in the case of forint mortgages; the three-, six- or twelve-month EURIBOR in the case of euro-based mortgages; and the three-, six- or twelve-month CHF LIBOR in the case of Swiss franc-denominated mortgages - or set a fixed rate for an interest period of three, five or ten years. They must publish the new fixed rate at least 90 days before the start of the new interest period.

The legislation prohibits mortgage lenders from charging clients who fulfill the terms of their contracts interest-like fees or other regular costs over the interest on their loans. It also prohibits mortgage lenders from offering discounted rates for limited periods of time.

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