Strengthening the mortgage lending and mortgage bond markets

The Magyar Nemzeti Bank has published the details of its mortgage bond purchase programme announced on 8 February 2010. The objective of the programme is to contribute to the development of the domestic mortgage bond market, and ultimately to reduce further the interest differential between forint and foreign currency loans and to boost forint lending by banks.

At its meeting on 8 February 2010, the Monetary Council of the Magyar Nemzeti Bank announced a programme to support the development of the domestic forint mortgage lending and mortgage bond markets. The overall objective of the programme is to remove obstacles to the autonomous development of the mortgage bond market, and thereby to enhance financial stability and the efficiency of the interest rate transmission mechanism. This may facilitate forint mortgage lending through a reduction in the interest differential against foreign currency loans.

Under the scheme, the Bank will offer to make primary and secondary market purchases of domestically issued forint mortgage bonds listed as eligible collateral up to a total amount of HUF 100 billion. All domestic credit institutions will be eligible to participate in the programme, subject to meeting the relevant technical criteria. The Bank will stand ready to make primary market purchases of mortgage bonds with original maturity of three years or more. The Bank will buy up to 20 per cent of bonds issued outside the issuer’s group as part of an issue, which is a clear indication of the Bank’s commitment to reinvigorating the market. The Bank requires those institutions participating in the programme to ensure the provision of continuous and firm two-way price quotes in the mortgage bonds it will purchase. That is expected to enhance the transparency of the secondary market of mortgage bonds. The first of the MNB’s mortgage bond auctions in the secondary market will take place on 10 March 2010.

The mortgage bond purchase programme is expected to be completed on 31 December 2010 at the earliest.

Detailed information on the programme is available on the Bank’s website at: