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Early FX mortgage repayments boost net household savings in Q4

The net financing capacity of households, or net household financial savings, reached 7.7% of GDP in the fourth quarter of 2011, boosted by an early FX mortgage repayment scheme that reduced household debt, the National Bank of Hungary (MNB) said in a report on preliminary financial accounts data on Friday.

Adjusting for seasonal factors, the repayments pushed the Q4 savings ratio to 6.2% of the quarter's GDP, the highest ratio measured since Q1 2000.


Excluding the repayments, net household savings reached 5.5% of GDP in the quarter, doubling from Q3 and well up from 4.6% in Q4 2010.


Households may have raised their savings abroad in Q4, based on banks' account turnover, the MNB said, noting that several of the developments during the quarter were partly or entirely outside of the scope of its statistics, making the preliminary data more uncertain and more liable to review than usual. 


The bank noted that some assets and liabilities retail borrowers mobilised to repay FX mortgages under the scheme were also outside of the scope of data it covers.


The MNB estimated that households cut their foreign currency cash holdings by HUF 120 billion, exchanging the amount for forints.


In nominal terms, Q4 net household savings reached HUF 604 billion with the repayments, and HUF 430 billion without the repayments. The difference is what households gained in Q4 on the government scheme which gave retail FX mortgage borrowers the option to repay loans in full at discounted exchange rates, with banks footing 70% and the government 30% of the loss. Household debt in loans fell less than the repayments as borrowers financed about a quarter of the repayments from forint loans. 


Net household financial savings reached 5.0% in 2011, excluding the effect of transfers of pension fund assets to the state, the report said. 


Hungarian members of private pension funds had until the end of January 2011 to opt out of a move, along with their retirement savings, back to the state pension pillar. About 97% of members returned to the state pillar, bringing some HUF 2,946 billion in assets with them.


The savings ratio was lower, at a preliminary 4.4% of GDP, if both the pension assets transfer and the effect of the early repayments is excluded.


Excluding the two one-off effects, the savings ratio was up from 4.2% in the four quarters ending Q3, but fell from 4.8% in 2010. 


Including the pension assets transfer, households had a net financing requirement of 4.5% of GDP last year as the transfer, carried out in June this year and accounted back for January 2011, made them net borrowers.


Q4 developments were largely affected by the repayments, as households repaid FX loans worth a little more than HUF 690 billion to credit institutions and took out forint loans of HUF 100 billion, mostly related to the repayments, in the period. The stock of their FX loans fell 4.3% in three months and 4.5% in twelve months while their forint loan stock rose 3.1% in Q3 and 6.7% in one year.


In addition to reducing foreign currency cash holdings, households exchanged part of foreign currency deposits into forint ones as these deposits fell HUF 103 billion but forint deposits rose by HUF 220 billion in Q4. Forint cash rose HUF 61 billion. Part of the repayments came from the sale of HUF 30 billion of stakes in companies, another HUF 77 billion came from the sale of investment fund units and HUF 36 billion from insurance technical reserves.