Budapest, 19 May 2017. – The Financial Stability Council of the MNB has determined the main characteristics of the certified consumer friendly housing loans, thus banks will have the option to put their products on the market as soon as possible. Certified housing loans may be taken with transparent conditions, thus easily comparable pricing is promoting well-informed borrowing. To obtain the certification banks may send their applications from 1 June 2017, and from this Autumn a calculator website operated by the MNB will also promote consumers’ financial awareness. All of this may increase competition between banks, encourage borrowing and strengthen consumers’ trust.

The Magyar Nemzeti Bank (MNB) considers it important from the perspective of both financial stability and consumer protection that there should be a strong competition on the market of housing loans. Examining the current situation based on internationally high average interest rate spreads and the low share of loan replacements, the MNB believes that the application of instruments boosting competition is warranted.

The creation of standardised, consumer friendly housing loan products and their widespread promotion may stimulate price competition between banks, thus may have a favourable effect on loan pricing. The reduction of interest rates is also supported by the criteria of the certification: only loans whose maximum interest rate spread is at least 100 basis points (1 percentage point) lower than the interest rate spread of 4.5 percentage points as stipulated in the “fair bank” legislation may be offered as certified consumer-friendly products. To this end, the MNB launched a programme on promoting the introduction of consumer-friendly housing loans certified by the MNB in Hungary in the Spring of 2017. Credit institutions may distribute housing loans with certification that fulfil the requirements set by the MNB and have undergone the certification process.

Having regard to the novelty and the widespread impact of the proposal, the MNB has conducted intensive consultations with market players and representatives of consumers on finalising the details of the certification in the last two months. As a result of the consultations, the MNB's Financial Stability Council elaborated the concept of the certification and the related application procedure in such a way that the distribution of products meeting consumers’ needs, stimulating market competition and encouraging loan redemptions could commence.

The main criteria certified products shall comply with:

  • Only equal monthly instalments may be set (annuity repayment);
  • The interest rate to be paid must be fixed for 3, 5, 10 years or until maturity;
  • The loan assessment deadline is a maximum of 15 business days from the availability of the appraisal of the property;
  • The disbursement deadline is 2 business days from the fulfilment of the disbursement requirements;
  • The interest rate spread relative to the benchmark rate chosen by the lender must not exceed 3.5 percentage points (350 basis points), which taking into consideration the changed credit risks is 1 percentage point (100 basis points) lower than the maximum interest rate spread set for loans converted into forint;
  • Fees arising until disbursement and related to prepayment have maximum limits:
    • Disbursement fee: maximum 0.75 per cent of the credit amount, but no more than HUF 150,000;
    • The early repayment fee must not exceed 1 per cent of the prepaid amount, and is free of charge to the extent of the contract amounts of deposits in home savings associations and the state subsidies related to them.

Credit institutions may request their products to be certified from 1 June 2017 on the basis of the detailed application conditions. Thus, distribution of certified consumer friendly housing loans can start this summer after the applications have been assessed. The comparability of the products will also be supported by the MNB’s calculator website to be launched in the Autumn of 2017.

The criteria of application and information for consumers including the list of the institutions distributing certified consumer-friendly housing loans and product documentation containing the main requirements of the loans will be accessible on the MNB’s website.

Magyar Nemzeti Bank