Corporate loans outstanding continued to shrink in 2013 Q1, declining by 6.3 per cent on a year-on-year basis. According to banks’ responses, there has been no material change in corporate credit conditions, and no shift is expected in the period covering 2013 Q2 and Q3 either, i.e. the broad-based tightening implemented in previous years will remain in place. The decline in interest rates on new corporate loans continued; overall, the cuts in the central bank policy rate starting in August passed through entirely into forint lending rates, hence the nominal interest rates of forint loans was around 8 per cent at the end of 2013 Q1. At the same time, due to the tightness of non-price credit conditions, only a narrow range of enterprises benefit from the more favourable lending rates.
Banks’ outstanding loans continued to decline in the household segment as well in 2013 Q1: the year-on-year change amounts to 5 per cent in the period under review. According to banks’ responses, the easing of household credit conditions is unbroken in the case of both housing and consumer loans; accordingly, further adjustment has taken place and can be expected in the broad-based tightening carried out at the end of 2011. Within new loans extended, only the annual percentage rate charged (APR) of housing loans tracked the policy rate cuts, thus the average market interest rate of housing loans declined to 10.5 per cent to the end of Q1. At the same time, in the case of new lending the interest rate spread continues to be extremely high (in excess of 5 per cent), which is also reflected in the historically low new loan volumes.
The contractionary behaviour of the banking sector is reflected in the developments in lending in both the corporate and household segments: the overall tightness of credit conditions continues to hinder a recovery in lending and the closing of the output gap.