Published: November 29 2023
The Central Bank of Hungary has recently announced a decrease in credit interest rates in Budapest. However, despite the decrease, the rates still remain at more than 50%. This article will provide an overview of the new interest rates and their impact on personal loans and credit cards.
Maximum Total Credit Cost Ratio (THM) for Personal Loans
From January 1st, the maximum THM for personal loans will decrease to 35.5%. According to the law, lenders are not allowed to offer loans to consumers with a THM that exceeds the central bank's benchmark interest rate by 24%. Currently, the benchmark interest rate is 37%, based on the rate valid until June 1, 2023. This means that the maximum THM for personal loans in the first half of 2024 will be 35.5%.
Credit Cards and Maximum THM
For credit cards, the maximum THM will remain above 50%. The maximum THM for credit cards, overdraft loans, installment loans, and pawnshop loans cannot exceed the central bank's benchmark interest rate plus 39%. Currently, the maximum THM for these types of loans is 52%. From January, this maximum will decrease to 50.5%. Therefore, an THM around 50% is still possible for credit cards.
Impact on Borrowers
The actual THM rates offered by banks are typically lower than the legal maximum. However, borrowers still face significantly higher interest rates compared to two years ago. Currently, it is rare to find loans with a THM below 10%, with most loans having a THM above 14%. The difference between the current and upcoming maximum THM rates can lead to substantial savings for borrowers. For example, for a personal loan of one million Hungarian Forints taken for 60 months, the total repayment amount can be around 50,000 Forints lower with the upcoming maximum THM rate.
Relationship with the Voluntary Interest Rate Cap
It is important to note that the maximum THM rate set by the law is separate from the voluntary interest rate cap introduced by the Ministry of Economic Development. The voluntary cap limits the maximum THM for residential mortgage loans and corporate working capital loans to 8.5% and 11.5% respectively. This cap does not directly affect the maximum THM for personal loans and credit cards.
In summary, the recent decrease in credit interest rates in Budapest will have an impact on personal loans, with the maximum THM decreasing to 35.5%. However, credit cards will still have a maximum THM above 50%. Borrowers should review their options and compare interest rates to ensure they are getting the best deal.
Questions & Answers
What is the maximum credit interest rate in Budapest starting in January? Starting in January, the maximum credit interest rate for personal loans will decrease to 35.5%, while for credit cards it will remain above 50%.
What is the maximum total credit cost ratio (THM) for personal loans in Hungary? The maximum THM for personal loans in Hungary can be 35.5% according to the current central bank base rate.
What is the maximum THM for credit cards in Hungary? The maximum THM for credit cards in Hungary will remain above 50% even after the interest rate decrease in January.
Are there any exceptions for higher THM in certain types of loans in Hungary? For credit cards, current account loans, consumer loans, and loans backed by pawn collateral, the total credit cost ratio (THM) can be higher but cannot exceed the central bank base rate increased by 39 percentage points. Currently, the maximum THM for these loan types is 52%.
What is the expected difference in the total repayment amount for a personal loan in Hungary between the current and the January interest rate? The expected difference in the total repayment amount for a one million Hungarian forint loan taken for 60 months will be around 50,000 forints less with the maximum THM in January compared to the current THM.
Is the maximum THM in Hungary affected by the voluntary interest rate cap introduced recently? No, the maximum THM set by law is independent of the voluntary interest rate cap introduced for consumer housing loans and corporate working capital loans. The voluntary interest rate cap sets the maximum interest rate for these loan types at 8.5% and 11.5%, respectively, but does not affect the maximum THM.