Changes have taken place in home loans these days

The debt brake rules, which take effect on October 1, have been in place since the first day of the month. Mortgage loan applications accepted since then are already subject to selective tightening rules!

Our good news is that the rise in notary fees has been postponed to January 2019!

On September 28, the Hungarian Official Gazette announced that changes to notary fees would only take effect from January 2019.

 

What is a debt brake?

What is a debt brake?

The debt brake rules will be amended as of October 1 to encourage home loan applicants and to provide predictable repayments on fixed-rate home loans.

  • The repayment tranche of short-term home loans can often change, even in a negative direction, so these clients must have sufficient income reserves to ensure that they can be repaid without problems.
  • Until now, the loan had to be borrowed so that the installment would not be more than 50% of their legal net income (60% of the income of at least HUF 400,000), ie not more than half of their net income.
  • As of October 1, the selective tightening method has come into effect, depending on the interest rate period (25% and 35% for higher income earners, respectively) and the new ratio (Yield Repayment Ratio = JTM) for loans with a shorter interest period.
  • That is, selective tightening only applies to short-term loans, not to long-term fixed-rate loans!

With this move, the MMB wants to turn borrowers into a longer interest period, which is already the case with new home loans: 88% of home loans have borrowed for more than one year in July!

“Within this, the ratio of still relatively risky 3-5-year loans was high (46%). Instead, the regulation prefers a longer-term interest rate than 5-year loans, which are predominantly 10-year loans and fixed-term loans.” we found out in the prospectus.

 

What are the expected effects of the new regulation?

What are the expected effects of the new regulation?

  • the most important effect is to encourage borrowers with a higher income-repayment installment to take out safer 10-year home loans instead of 3 and 5 years!
  • borrowers may respond to changes by applying for longer than expected maturities, or by reducing the amount of credit or deferring borrowing. This may also slightly slow down the growth rate of the housing market.

Overall, the new regulations will not have a significant impact on the housing market, but the real solution is the combination of a home loan and a home savings product, which will make it easier to bypass the new debt brake regulation.

If you are interested in finding out more about consumer-friendly credit, details about CSOK and taking out a home loan on favorable terms, contact our credit brokerage experts who will provide you with free professional loan information!

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