MNB sees no housing bubble, has tools to intervene

Analysis

Signs of a housing bubble "cannot be observed for the time being," but the National Bank of Hungary (MNB) is prepared to intervene with a number of macroprudential instruments if necessary, the central bank said in an introduction to a paper detailing the available tools, Hungarian news agency MTI reported today.

MNB experts noted in the paper that the central bank introduced debt-brake rules from the start of 2015 that place limits on how much households may borrow and the scale of their installments based on income and collateral. From the start of 2016, the MNB also introduced a countercyclical capital buffer to mitigate excessive credit outflow.

"As there is neither a serious price bubble nor any apparent signs of excessive lending at present, the debt-brake rules have not really limited lending so far. For the same reasons, the MNB has not yet required lenders to build up a countercyclical capital buffer," the authors of the paper said.

The countercyclical capital buffer is set at 0-2.5% of total risk-weighted assets each quarter in an MNB decree. At present, the rate stands at 0%.

"The significance of the tools at present is that they were introduced in due course. Thus they can be quickly and effectively put to use at the start of a possible overheating of the credit market in future," the MNB experts said.

The MNBʼs home price index rose more than 50% for Budapest between 2014 and early 2016, both in nominal and inflation-adjusted terms. The per-meter price of homes in the capital rose by a similar degree during the period.

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