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Volume of home loans continued to rise in H1 2016

MNB

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In the first half of 2016, the volume of new home loans was HUF 217.3 bln, up 57% annually compared to the corresponding period of 2015, the National Bank of Hungary (MNB) said in its Housing Market Report today, Hungarian news agency MTI reported.

The ratio of loans used for purchasing newly built homes rose by 2 percentage points within new transactions, but nevertheless remains low. New contracts amounted to only 10.1% in Q2 2016, while 63.6% of housing loans were used to purchase used homes. The low supply of new homes played a key role in this, according to the MNB. 

The ratio of state-subsidized HUF loans increased somewhat over the past six months and accounted for 16% of newly contracted housing loans at the end of June. The low utilization of subsidies can be explained mostly by the fact that average market interest rates reached the level of the interest rate available via the interest subsidization.

The biggest market participants were able to increase their market share on the new home loans market in the second half of the year as the market share of the three largest credit institutions reached 67.2% at the end of Q2, up from 62.2% at the end of 2015. Market concentration, however, was still down from 68.5% at the end of June 2015.

The average annual percentage rate of change in newly issued loans decreased in H1 2016 by 0.1 percentage point to 5.7%, because of a decline in the reference interest rate following a base rate cut and a rise in spreads. The average interest level of the schemes provided by home savings associations continues to exceed the market average.

The MNB Lending Survey reveals that a net one-third of banks eased their credit terms on housing loans in Q2, while the standards remained unchanged in Q1. Respondents mentioned developments in market trends as the primary, and market share objectives as the secondary motive for the easing. Easing mainly took place in price conditions, with minimal easing in the required creditworthiness level.

Looking ahead, banks do not intend to ease conditions in the coming six months and expect a broad continuation of the recovery in demand.

In H1 2016, some 61,000 individuals expressed interest in the governmentʼs home purchase subsidy scheme for families (CSOK) and 12,000 applications were submitted to banks by the end of June to a total value of HUF 32 bln, with the 9,401 concluded contracts reaching HUF 21.5 bln in value. In Q2, roughly 12% of newly extended housing loans were linked to the scheme.

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