Budapest, 2 September 2019 – In Q2 2019, the value of corporate credit transactions was outstanding, partly due to one-off transactions. Total corporate loans increased by 16 per cent and SME sector loans by 13 per cent year-over-year. The household sector's loan portfolio expanded by 8 per cent year-on-year, mainly due to higher housing and personal loans. The pick-up in lending in both the corporate and household segments was accompanied with unchanged credit conditions. The NHP fix in the corporate sector, and the debt cap rules and the Certified Consumer-Friendly Housing Loans in the household segment effectively mitigate the interest rate risk of new issuance. Household loan demand is expected to be further boosted by measures under the Family Protection Action Plan in the second half of the year. The current credit expansion, in terms of both structure and volume, is not considered to be overheated in either segment, given developments in the real economy and low credit penetration.

2019 Q2 was characterised by an exceptional, HUF 435 billion expansion in transactions, as a result of which outstanding corporate loans grew at an annual rate of 16 per cent. This growth was unprecedented since the global financial crisis. Outstanding loans increased by 13 per cent in the SME sector, with a contribution from disbursements of the Funding for Growth Scheme Fix as well, which was launched in January 2019. During the quarter, several exceptionally large transactions also played a key role in growth, which was broad-based in a breakdown by sectors and banks as well. The volume of new loans was similar to that of the previous quarter, but the share of longer-term contracts increased in the period under review. While as in the countries of the region, the average interest rate on low-amount loans rose slightly in Q2, interest rates on high-amount loans declined to some extent, primarily as a result of changes in spreads.

While credit conditions tightened somewhat in the euro area as a whole, there were no major overall changes in conditions in Hungary according to the findings of the latest Lending survey. At the same time, some respondents reported an easing in price conditions, while a few banks tightened conditions on commercial real estate loans. The ratio of credit institutions that considered market competition as a factor pointing to an easing of conditions was higher. According to most banks, demand for longer-term loans grew more strongly than for shorter-term loans. On the whole, responding credit institutions expect similar trends both on the demand and supply sides in the next half year as well.

The annual value of household loan transactions was close to HUF 500 billion, with a contribution of HUF 170 billion in 2019 Q2, and thus annual growth in these outstanding loans amounted to 8 per cent. Housing loan and personal loan disbursements rose further in the period under review (by 20 per cent and 36 per cent, respectively). In real terms, granting of housing loans is four-fifths of the 2008 level that directly preceded the crisis, but in the current credit cycle the debt cap rules reduce the risk of excessive indebtedness and also spur the reduction in households’ exposure to interest rate risk.

Banks do not see any room for easing in credit supply conditions, while they expect a pick-up in demand in the case of housing loans and consumer loans. The support programmes launched in July 2019 within the framework of the Family Protection Action Plan also contribute to this. As noted by the banks, buoyant demand was seen in July for prenatal baby support, and for the time being clients whose credit rating is already good are taking advantage of this programme.

The spread of loans with longer interest rate fixation, even up to the end of the term, reduces the financial stability risks of the household loan portfolio. 27 per cent of the volume of housing loans granted in Q2 was fixed until maturity, one-fifth had a 5-year interest rate fixation and half of that were fixed for 10 years. Since its introduction in October 2018, the debt cap rule on the payment-to-income (PTI) ratio differentiated by interest rate fixation periods has encouraged households to take loans with longer interest rate fixation, contributing to an increase in the volume-based share of loans with interest rate fixation of at least 10 years, which rose from 20 per cent to 50 per cent in one year.

Overall, the MNB does not consider the current dynamics of credit expansion to be overheated in the segments in terms of structure or volume, taking into account developments in the real economy and the low level of credit penetration.

Trends in lending

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:

Lending survey