New record in housing loans

Budapest, 10 September 2021 — In the second quarter of 2021, outstanding lending to non-financial corporations rose by 7 per cent in annual terms. In the SME segment, annual growth in loans outstanding was 21 per cent in the period. The volume of corporate lending in the quarter exceeded the year-on-year figure by 40 per cent. The HUF 424 billion quarter-on-quarter increase in outstanding borrowing by households resulted in an annual growth rate of 16 per cent, with the volume of new housing loan contracts contributing a record HUF 364 billion, in addition to stable disbursements of prenatal baby support loans. Although new home subsidies, available from 2021, played a major in this, rising house prices, inflation expectations and demand brought forward in connection with the tightening cycle may also have stimulated the unprecedented growth in the volume of new loan disbursements. Banks did not change conditions on corporate and housing loans during the reporting quarter; however, they perceived growing credit demand in both segments, which may even pick up during the remainder of the year.

In the second quarter of 2021, the outstanding borrowing of non-financial corporations fell by HUF 11 billion due to transactions. In the 12-month period ending in June total loan disbursements exceeded the volume of loan repayments by HUF 656 billion, due to which banks’ outstanding lending to corporations rose by 7.4 per cent. When also taking into consideration corporate bonds subscribed to and purchased by banks, the loans and bonds of credit institutions outstanding to non-financial corporations grew by 12 per cent in total during the same period. The moratorium on payments, introduced last March, resulted in a fall in principal instalments due, while the central bank and government loan and guarantee schemes, introduced to mitigate the economic impacts of the coronavirus, exerted a favourable impact on new loans. In the second quarter, corporations concluded new loan contracts of roughly HUF 941 billion, which exceeded the volume of new loans disbursed in the fourth quarter of 2020 by 40 per cent. Outstanding borrowing of micro, small and medium-sized enterprises rose by 21 per cent in annual terms, significantly supported by FGS Go! concluded during the quarter, accounting for almost two-thirds of SME loans. Although the total amount of FGS Go! will be utilised in the summer months, the gradual and continuous drawdown of the contracts concluded under the scheme will continue to support the SME credit market during 2021 even in the period after the closing of the scheme. As a result of banks’ ample lending capacities and other state-subsidised credit schemes, the SME segment’s sound credit dynamics are expected to continue in the future as well.

Based on the responses of banks participating in the Lending Survey, in the second quarter, corporate credit conditions did not change significantly, while there was a pick-up in demand for both short-term and long-term loans. Looking ahead, banks plan an easing in the lending conditions for all enterprise size categories, parallel to which they anticipate a further pick-up in demand in the second half of 2021.

In the second quarter of 2021 retail loans outstanding grew by HUF 424 billion due to transactions, accelerating the annual growth rate to 15.8 per cent. The extraordinary growth is primarily attributable to the dynamic increase in housing loans and prenatal baby support loans, with the latter already accounting for 15 per cent of household loans outstanding in June. The volume of housing loans disbursed during the quarter in the amount of HUF 364 billion is a new historic peak, with a major contribution by the new home subsidies available from 2021. Retail loan disbursement in the 12 months ending in June 2021 fell short of the level registered a year ago by 10 per cent, which is attributable to the high base resulting from the soar in prenatal baby support loans after the scheme was launched in July 2019. Housing loan applications are still dominated by the purchase of used homes; however, the share of loans used for renovation and improvement is gradually rising. For these purposes, two and a half times more loan contracts were concluded during the quarter than in the same period of the previous year. The volume of Home Purchase Subsidy Scheme for Families requested both for the purchase of used and new homes grew markedly during the quarter, and is still dominated by the rural HPS. The APR-based average spread on housing loans declined in all interest rate fixation categories as the gradual rise in long-term yields since the beginning of the year has not yet passed through fully to banks’ interest rates. Personal loans also registered a decrease in spreads during the quarter, which was partly attributable to the penetration of Certified Consumer-friendly Personal Loans.

According to the responses to the Lending Survey, banks did not change the conditions of housing loans during the quarter; however, all institutions perceived a pick-up in credit demand, which may become even stronger during the rest of the year due to the central bank’s Green Home Programme starting in the autumn. Looking ahead to the next half-year, banks are still not planning any change to their current housing loan conditions, while in the case of consumer loans only a few institutions anticipate easing. Based on the Bank Sentiment Survey, in line with the growing bank competition, half of the respondent banks plan to increase their exposure in the household segment in the second half of 2021, while almost one fifth of them also expect that their portfolio will deteriorate after the end of the general moratorium.

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

Detailed results and the figures of the Bank Sentiment Survey are available on the MNB’s website at the following link:

Bank Sentiment Survey