Budapest, 30 August 2018 – Outstanding lending to both the corporate sector and SMEs grew strongly in 2018 Q2. However, growth in the amount of new long-term fixed-rate loans disbursed to the corporate segment continued to be modest. Banks eased primarily their price terms in the period. Demand for credit, mainly for long-term financing, picked up. The stock of lending to households increased by 4 per cent compared to a year earlier, supported by robust disbursement of new housing and personal loans. The share of fixed-rate loans in housing loans rose to 82 per cent, parallel with an expansion in Certified Consumer-Friendly Mortgage products. The interest rate spread on fixed-rate housing loans approached the level of variable-rate loans during the period.
The dynamic increase in corporate lending continued in 2018 Q2, and thus on a year-on-year basis, as a result of transactions, total corporate loans outstanding rose by HUF 750 billion, corresponding to an annual expansion of 12.1 per cent. According to the preliminary data, loans to the SME sector rose by nearly 16 per cent year-on-year, within which the micro segment expanded the most, with an increase of 22 per cent. In Q2, the transaction-based increase in loans outstanding amounted to HUF 240 billion, of which some HUF 140 billion was related to the SME sector. There has been no major rise in the ratio of fixed-rate loans, especially in case of long-term loans, since the decline seen following the phasing out of the Funding for Growth Scheme: while in 2015, 80 per cent of HUF-denominated SME loans with over 1-year maturity were disbursed with interest rate fixation, this ratio was only 20 per cent over the last one year. Convergence to the ratios observed in the more developed European countries would be desirable.
Based on banks’ responses to the Lending Survey, credit conditions eased in each corporate segment in Q2, which – according to banks’ perception – was mainly reflected in a decline in interest rate spreads and was primarily due to increased competition and favourable developments in economic prospects. Corporate credit demand tended to strengthen in the segment of longer-term loans. Looking ahead to the next half year, banks expect these trends to continue.
During the quarter under review, as a result of disbursements and repayments, household loans outstanding increased by HUF 159 billion, corresponding to an annual rise of 4.1 per cent. Although this is the strongest growth observed since the crisis, it is not exceptional in a regional comparison, also taking into account the low level of financial deepening measured on the basis of the credit-to-GDP ratio. The growth is facilitated by the continuously increasing volume of new loans: in the past one year, the total value of household borrowing was 31 per cent larger than that of the contracts a year earlier. By product type, housing and personal loans prevail, with annual increases of 39 per cent and 48 per cent, respectively.
Interest rate spreads on housing loans with interest rate fixation decreased in the period under review, and thus the average spread in the case of loans with 1-5 years of initial fixation reached the level of variable rate loans, and in the case of loans with over 5 years fixation it approached to 0.2 percentage point of that level. Among housing loan disbursements, in parallel with the spread of Certified Consumer-Friendly Housing Loan products, the ratio of loans with up to one-year initial rate fixation declined to 18 per cent. According to banks’ responses, credit conditions were eased to a small extent in the quarter under review, and thus the expansion in demand continues to lead the market both in the housing and consumer loan segments.
The MNB summarises the supply conditions of lending developments using the Financial Conditions Index. According to this indicator, the cyclical impact of the banking sector’s lending activity on economic growth can be deemed neutral. Accordingly, in terms of the annual expansion in the real economy, neither a significant cycle-strengthening nor growth-restraining impact is experienced.
The objective of the publication ‘Trends in Lending’ is to present a detailed picture of the latest trends in lending and to facilitate the appropriate interpretation of these developments. To this end, the report elaborates on the developments in credit aggregates, demand for loans perceived by banks and credit conditions, based on the Lending Survey, and the balance sheet and interest rate statistics of the banking system. Detailed results and the figures of the Lending Survey are available on the MNB’s website at the following link: