Budapest's Central Bank Lowers Interest Rates, Making Mortgages Even Cheaper

Published: November 21 2023

In a recent decision, the central bank of Budapest has lowered its interest rates, resulting in even cheaper mortgages for borrowers. This article will provide an overview of the key details and implications of this decision.

The central bank has reduced the benchmark interest rate by 0.75 percentage points to 11.5%, with the overnight deposit rate at 10.5% and the overnight lending rate at 12.5%. This decision was expected due to the decrease in annual inflation and favorable macroeconomic conditions.

The lowering of interest rates is expected to have a positive impact on mortgage rates. The decrease in benchmark rates may allow for the adjustment of the current interest rate cap for housing loans, potentially resulting in lower borrowing costs for individuals.

Experts anticipate that the central bank may further reduce the benchmark interest rate to a single-digit figure in the first half of next year. This reduction is seen as necessary to remove the interest rate cap imposed in 2022 and align with government plans. Additionally, the benchmark interest rate will serve as a reference point for the "baby loan" program, where penalties for non-compliance will be tied to the benchmark rate.

The central bank's decision will also impact bank deposits and loan rates. Some banks offer deposit accounts with interest rates tied to the benchmark rate, although this may become less attractive due to the availability of more favorable rates on certain government bonds. Additionally, the decision is likely to lead to a decrease in interbank interest rates, affecting adjustable-rate loans and potentially changing the repayment amounts for existing loans.

Overall, the central bank's decision to lower interest rates is expected to stimulate borrowing and support economic growth in Budapest. Borrowers can look forward to more affordable mortgage rates, while the implications for deposits and loans will depend on individual banking institutions.

What is the central bank interest rate in Hungary? The central bank interest rate in Hungary will be reduced to 11.5% starting from tomorrow.

Why did the central bank lower the interest rates in Hungary? The central bank lowered the interest rates in response to a decrease in annual inflation and favorable macroeconomic conditions.

How will the decrease in interest rates affect mortgages in Hungary? The decrease in interest rates is expected to make mortgages even cheaper in Hungary.

When is the next interest rate decision expected in Hungary? The next interest rate decision is expected to be made during the week before Christmas.

What is the inflation forecast for Hungary at the end of the year? The central bank forecasts that inflation in Hungary will be in the range of 7-8% by the end of the year.

When is the inflation expected to return to the central bank's target range in Hungary? The central bank expects that the consumer price index will return to the target range of 2-4% in 2025.

When can we expect single-digit interest rates in Hungary? Analysts expect that single-digit interest rates could be introduced in Hungary in the first half of next year.

How will the central bank interest rate affect the babaváró loans in Hungary? The central bank interest rate will serve as an important reference for the babaváró loans in Hungary. If the conditions for interest-free repayment are not met, the penalty interest rate will be aligned with the central bank interest rate.

Will the decrease in interest rates also affect bank deposits and loans in Hungary? Yes, the decrease in interest rates will also affect bank deposits and loans in Hungary. Some banks offer deposits that are tied to the central bank interest rate.