Parliamentary committee submits bill capping APRs

Parliament’s Economy and IT Committee has submitted a bill to Parliament capping effective annual percentage rates (APRs).

The bill would cap APR for loans to private individuals - either from lending institutions or other private individuals - at 24 percentage points over the National Bank of Hungary (MNB) base rate, which is 6% at present.

The APRs would be capped for the first half of the calendar year based on the base rate on December 31 of the previous year and for the second half of the calendar year based on the base rate on June 30.

The bill would cap APRs for credit cards and consumer loans, excluding car loans, at 39 percentage points over the MNB base rate.

In the case of mortgage loans, lenders would be 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 bill would prohibit 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 would also not allow mortgage lenders to offer discounted rates for limited periods of time.