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Healthy growth in household lending in 2018 Q3

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Budapest, 29 November 2018 – Loans to both the corporate sector as a whole and to the SME sector rose by 14 per cent in 2018 Q3. In corporate disbursements, the share of long-term fixed-rate loans is still low; therefore, the MNB will launch a new facility within the Funding for Growth Scheme, the FGS fix, from the beginning of 2019. Banks continued to ease price conditions of lending, which was accompanied by a pick-up in credit demand. The annual growth rate of household loans outstanding rose to 5 per cent, and new disbursements of housing loans and personal loans continued to pick up. The share of fixed-rate housing loans rose to 87 per cent during the quarter. This was accompanied by growth in Certified Consumer-Friendly Housing Loans. With funding costs on the rise, the interest rate spread on fixed-rate housing loans fell sharply.

As a result of disbursements and repayments, non-financial corporations’ loans outstanding increased by HUF 324 billion in 2018 Q3. Consequently, outstanding borrowing by the corporate sector rose by nearly HUF 900 billion year-on-year, which corresponds to an annual growth rate of 14 per cent. Based on preliminary data, outstanding loans of the SME sector also rose by 14 per cent year-on-year. The share of long-term, mainly fixed-rate, loans has not increased significantly since the Funding for Growth Scheme was phased out; therefore, the MNB will launch the FGS fix scheme.

Based on banks’ responses to the Lending Survey, credit conditions were eased further in the case of both micro and small enterprises and in medium-sized and large companies in 2018 Q3; however, as regards the latter, only a narrower range of banks reported easing. This was primarily due to increasing competition in the market, which was reflected in the applied interest rate spreads. According to the respondent institutions, more wide-ranging easing may take place in the next six months than earlier, simultaneously with the start of the FGS fix. This will mainly affect price conditions of lending to smaller corporations. As seen in the last two years, corporate credit demand grew further, particularly for long-term loans.

Over the past year, household loans outstanding of the credit institution sector expanded by 5.1 per cent on a transactional basis. In 2018 Q3, the value of transactions was HUF 145 billion, which was also reflected in the stocks of housing and consumer loans. The value of new loans grew by 27 per cent on an annual average. Within this, new contracts of the two predominant loan products, housing and personal loans, increased by 39 per cent and 49 per cent, respectively.

Average interest rate spreads on variable rate housing loans rose in the period under review, while spreads on fixed-interest rate housing loans fell both in products with 1–5 years and over 5 years initial interest rate fixation, accompanied by an increase in funding costs. This average spread of 2.5–2.6 percentage points is below that on variable-rate loans. Within housing loans, the share of loans with over 1-year fixation rose to 87 per cent, while the share of Certified Consumer-Friendly Housing Loans products (within loans with up to 3-year fixation) rose to nearly 60 per cent. The further mitigation of interest rate risk has been facilitated by the amendment of debt cap rules effective from 1 October 2018, which prescribes a payment-to-income ratio constraint differentiated by the interest rate fixation period. According to the banks’ responses to the Lending Survey, credit conditions remained unchanged both in the housing and consumer loan segments in the quarter, and no significant easing is be expected in the next half year. Meanwhile, the household sector’s credit demand continued to rise, and banks expect this to continue in the next half year as well.

The MNB will publish the next Trends in Lending report in March 2019. The objective of the publication 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:

Lending survey

MAGYAR NEMZETI BANK
Communications

Contact information:

Phone: 428-2751
Fax: 429-8000
Email: sajto@mnb.hu

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