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Banks offer 104 ‘consumer-friendly’ home loan products

All major banks and savings cooperatives in Hungary are offering "consumer-friendly" home loan products, providing consumers a total of 104 products to choose from, the National Bank of Hungary (MNB) said on Wednesday, as reported by state news wire MTI.   

Loans offered by Budapest Bank, UniCredit Bank, CIB Bank, Raiffeisen Bank, OTP Mortgage Bank, MKB Bank, K&H Bank, Erste Bank Hungary, FHB Commercial Bank and 50 of Hungaryʼs integrated savings cooperatives have been certified as consumer-friendly. These institutions together covered 80% of the retail home loan market last year, the central bank said.

Based on a market survey, the MNB found that, compared to the lowest APR of an average HUF 10 million loan with a 20-year maturity and a five-year fixed-term interest rate period, the APR of consumer-friendly loans with similar criteria was some 0.6 percentage points lower, at 3.89%.

The MNB noted that in the current interest environment, loans with longer or fully fixed interest periods are safer. Loans with shorter interest rate periods might have lower costs based on APR, but could be especially risky, it added. 

The central bank recently rolled out the consumer-friendly home loan certification to counter high interest margins and a low rate of borrower refinancing. The MNB said competition among banks for clients had not been intensive enough. Lenders have been able to apply for the certification since June 1.  

To become certified, banks must cap their home loan lending margins at 350 bps, origination fees at 0.75% or HUF 150,000, and early repayment fees at 1% or, in the case of repayment from home savings bank accounts, 0%. Lenders must also make potential borrowers an irrevocable loan offer when they inquire at a branch.