Are you sure?

Proportion of problem loans grows in Hungary portfolio

The proportion of substandard, doubtful and loss home loans in the portfolios of Hungarian lending institutions doubled in the twelve months to the end of June, though still accounting for just 2% of all lending stock, while the proportion of special mention loans was halved, a review of the sector by the Central Statistics Office (KSH) shows.

About 94% of stock of home loans at credit institutions in Hungary was problem-free at the end of June. Special mention loans accounted for 4% of the portfolio and substandard, doubtful and loss loans for a combined 2%.

Stock of home loans at banks, mortgage institutions, savings cooperatives and other financial institutions in Hungary reached HUF 3,894 billion at the end of June, or about 15% of GDP. Banks accounted for about 63% of the total stock, mortgage institutions for 33% and other lenders for about 4%.

About 62% of the stock was denominated in foreign currency, a proportion which has risen steadily since 2002. The rapid increase of foreign currency-based lending came to a halt in 2008, growing just 2% after many banks stopped offering popular Swiss franc-based constructions because of the risk to borrowers.

In the first half of 2009, lenders signed contracts for more than 30,000 home loans worth a combined HUF 180 billion, plunging 58% and 60%, respectively, from the same period a year earlier as liquidity dried up because of the global crisis.

About 27% of new home loans signed during the period were subsidized by the state, up from 8% in H1 2008. The proportion grew as banks cut back on foreign currency-based lending, which the state does not subsidize.

Foreign currency-based lending contracts accounted for 56% of the number of contracts and for 66% of the value of contracts signed in H1 2009, down from 80% and 90%, respectively, in the same period a year earlier.

The average home loan signed during the period was for HUF 6 million, 5% less than in H1 2008. The proportion of new home loans for new homes rose to 39% in H1 2009 from 24% in H1 2008.

The average run of home loans for new homes was 18 years. The term for loans for resale homes was 15 years. (MTI-ECONEWS)