Grace periods on large numbers of restructured mortgage loans will expire en masse within the next six months

The MNB today published its latest lending survey

The Magyar Nemzeti Bank has published the results of its latest lending survey, conducted in October 2010. According to the survey, credit conditions in either the household or the corporate segment are not expected to change over the next six-month period. The survey also found that, so far, grace periods have expired on only around 15 per cent of restructured mortgage loans and will expire on another 50 per cent within the next six months.

The Magyar Nemzeti Bank launched it questionnaire-based survey in the spring of 2003 with the objective of gaining a deeper insight into Hungarian commercial banks’ lending practices. The survey, conducted on a quarterly basis, presents senior loan officers’ assessment of the loan market. The latest published survey is based on questionnaires returned by lenders in October 2010, and presents their answers to retrospective questions relating to 2010 Q3 as well as to forward-looking questions asking for their expectations for the next six months.

The survey found that some banks perceived the prohibition of foreign currency-denominated mortgage lending as a further tightening of credit conditions. Overall, banks do not expect any considerable changes in credit conditions in either the household or the corporate segment over the next six-month period. This implies that in the corporate segment the current tight credit conditions may remain.

Similar to the previous survey, the current survey once again focused particularly on the restructuring of distressed clients’ outstanding loans, in addition to lending activity. In 2010 Q3, the share of restructured loans (expressed as a percentage of total loans outstanding in the segment) increased slightly. However, the ratio of restructured loans more than 30 days delinquent to the total restructured mortgage loan portfolio rose from 25 to 27 per cent. Moreover, the same ratio for restructured loans more than 90 days delinquent (re-defaulted) increased from 12 to 17 per cent. The acute payment problems (over 90 days delinquency) observed within the portfolio of restructured loans are closely related to the expiration of grace periods granting temporary relief for borrowers’ from their debt servicing burdens. According to the respondents, so far grace periods have expired on only around 15 per cent of restructured mortgage loans and will expire on another 50 per cent within the next six months.

The full survey is accessible on the MNB’s website in the ‘Financial Stability’ section under ‘Lending Survey’

Lending Survey

MAGYAR NEMZETI BANK

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