Budapest, 19 May 2017 – The Financial Stability Board of the MNB has finalised the main requirements towards certified consumer-friendly housing loans; the way is now open for banks to start granting these loans as soon as possible. Certified housing loans allow for borrowing with transparent conditions and easily comparable pricing, thus supporting more prudent borrowing. Banks can submit their tenders for the certification starting on 1 June 2017; the MNB’s mortgage calculator and comparison website supports consumers in gathering information from this autumn. These steps may reinvigorate bank competition, incentivise loan refinancing and strengthen consumer trust.
The MNB attaches special importance to active competition in the housing loan market both from a financial stability and a consumer protection point of view. The MNB believes that, looking at current practices, the interest rate spreads that can be deemed high even in an international comparison and the low proportion of refinancing loans both warrant competition-enhancing measures.
Price competition among banks may be reinvigorated and therefore the price of loans may become more favourable to consumers through the introduction and the wide-spread use of standardised loans with consumer-friendly features. The fact that loans can only be regarded as certified with an interest rate spread at least 100 basis points (1 percentage point) lower than the 4.5 percent interest rate spread limit set by the so-called fair banking act also points towards decreasing interest rates. That is why the MNB decided in spring 2017 to incentivise the introduction of MNB-certified consumer-friendly housing loans in Hungary. Banks may offer loans as certified that comply with the requirements set by the MNB and have gone through the certification process.
Due to the novelty and wide-reaching impact of the proposal, the central bank initiated intensive consultations with market participants and the representatives of consumers to finalise the details of the certification. As a result of the consultations, the Financial Stability Board of the MNB approved the main features of the certification and the related tender so that banks may start offering loan products that satisfy consumer needs, strengthen market competition and incentivise loan refinancing.
The main requirements towards certified consumer-friendly housing loans:
- Only equal monthly instalments are accepted (annuity-type repayment)
- The payable interest rate must be set for 3, 5 or 10 years or until the end of the repayment period
- Credit assessment must be carried out in 15 working days after the completion of the appraisal of the property
- Loan disbursement must be carried out in 2 working days after the disbursement conditions are satisfied
- The interest rate spread is limited to 350 basis points above the chosen reference rate. Taking into account changes in credit risk, the limit is set 100 basis points lower than the 4.5 percent interest rate spread limit stipulated by the so-called fair banking act.
- Fees payable until the disbursement and the early repayment fees are limited:
- Disbursement fee: Max. 0.75 percent of the credit amount, but maximum HUF 150 000.
- The early repayment fee is limited to 1 percent of the repaid amount. In case of repayment from the building savings account (up to the contracted maximum savings and the attached state subsidy), early repayment is free of charge.
Based on the detailed tender conditions banks can submit their tenders for certification starting on 1 June 2017. Following the evaluation of tenders, certified consumer-friendly housing loan originations can start as early as this summer. The MNB’s mortgage calculator and comparison website also supports consumers in gathering information starting in autumn 2017.
Tender conditions and information for consumers, including the list of banks offering certified consumer-friendly housing loans, and documents on product features are available on the MNB’s website.