31 May 2018
Corporate and household lending continued to expand in 2018 Q1. The annual growth rate of total corporate loans was above 10 per cent and that of SME picked up to 14 per cent. According to banks’ perception, competition increased further in the credit market and corporate credit demand improved again. The stock of household loans also continued to expand, growing by nearly 3 per cent in annual terms, reflecting the considerable contribution of housing loans and personal loans. Dynamic growth in Certified Consumer-Friendly Housing Loans products facilitates competition in the banking sector and, consequently, the build-up of mortgage lending in a healthy structure.
In 2018 Q1, corporate loans outstanding rose by 10.3 per cent in annual terms due to transactions, while loans to the SME sector expanded by 14.2 per cent and 13 per cent including self-employed persons. Due to seasonal effects, the balance of disbursements and repayments was around HUF 130 billion, which was somewhat lower than in the previous quarter. However, the transaction-based expansion of around HUF 630 billion observed in the last four quarters was nearly two-and-a-half times higher than last year, and therefore the expansion in the corporate loan portfolio is the most dynamic in Hungary among the countries of the region. The annual volume of loan contracts concluded was 26 per cent higher than that recorded a year earlier, which suggests a further increase in disbursements.
According to banks’ responses in the Lending Survey, credit conditions eased in the sector of small and micro enterprises in 2018 Q1. According to banks’ perception, the easing of conditions in the market was mainly reflected in a decline in interest rate spreads, including a decrease in spreads on riskier loans. As seen in the previous two quarters, most of the participants indicated increased competition as a factor contributing to the easing of conditions. The institutions participating in the survey reported rising credit demand with regards to large companies and SMEs as well. Looking ahead, basically they expect these trends to continue, i.e. a decrease in spreads accompanied by strengthening credit demand and increasing competition in the banking sector; however, some of the institutions that deemed the conditions of commercial real estate loans broadly unchanged are planning a tightening for non-residential projects.
In 2018 Q1, the stock of lending to the household sector increased due to disbursements and payments, which was supported by an increase in personal loans and housing loans. As a result, lending growth in the household sector was 2.7 per cent. The annual average increase in the volume of new loans was 37 per cent. Within that, new housing loans and personal loans grew by 36 per cent and 50 per cent, respectively. 73 per cent of housing loan contracts concluded in the quarter were for used homes, which shows an upward trend relative to the 69 per cent rate recorded in the same period of the previous year.
Based on the responses to the Lending Survey, banks did not change their terms of housing loans and personal loans during the quarter. Looking ahead, however, they expected further easing on both types of loans. Banks perceived strong demand for housing loans in the first three months of the year, which they expected to continue in 2018. Strong demand continues to be supported by the Home Purchase Subsidy Scheme for Families (HPS): 14 per cent of the volume of new lending for house purchase was linked to the HPS. The increasing popularity of Certified Consumer-Friendly Housing Loans (CCHL), facilitating competition among banks, contributes to the further expansion in fixed-rate loans and to a decline in spreads. The average APR on new forint loans fell over every interest rate fixation period; and spreads on housing loans fixed for 1-5 years fell significantly, by 50 basis points, during the quarter. By the end of the period, one-half of housing loans with fixed interest was certified. In addition, the ratio of loans with initial fixations periods of over one year reached 76 per cent.
The MNB summarises the supply conditions of lending developments in the Financial Conditions Index. According to this measure, the cyclical impact of the banking sector’s lending activity on economic growth may be deemed neutral. Accordingly, in terms of the annual expansion of the real economy, neither a cycle strengthening, nor a growth-restraining material impact is experienced.
The MNB will publish its next Trends in Lending report in August 2018. The objective of the report 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: