New Rules Coming: Lower Interest Rates on Loans in Budapest from January 2024

Published: December 12 2023

Starting from January 2024, new rules will be implemented in Budapest regarding lower interest rates on loans. The voluntary interest rate cap will decrease significantly, allowing banks to offer housing loans with a maximum Total Cost of Credit (TCC) of up to 7.3% instead of the current 8.5%.

The voluntary interest rate cap, which will be effective from January 2024, has already led to a significant reduction in interest rates on housing loans. Currently, there are a few loans with a TCC lower than 7.3% for a 10-year interest period, but most fixed-rate loans have higher rates. However, experts predict that after January 2024, banks will offer even cheaper housing loans with lower interest rates.

The new rules will result in lower monthly repayments for borrowers. For example, for a 20 million HUF loan with a 20-year term and a net income of 350,000 HUF, the current average TCC among banks is 7.97%, resulting in a monthly repayment of around 167,000 HUF. With the implementation of the 7.3% TCC cap, the average repayment would decrease to around 158,000 HUF, saving borrowers approximately 8,200 HUF per month and a total of 1.9 million HUF over the loan term.

While waiting for the new rules to come into effect may seem tempting, it's important to note that there are already cheaper loan options available in the market. However, with the implementation of the lower interest rate cap, it is expected that banks will offer even more favorable loan terms, and the lowest interest rates may decrease further. This means that interest rates below 7% will become more common in the future.

Additionally, banks may engage in price competition, leading to even more competitive loan offers in the market. It's also important to consider that the TCC includes additional costs associated with loan applications, such as valuation fees, land registry fees, mortgage registration fees, and account management fees. Therefore, even if the TCC is 7.3%, the actual interest rate may be around 7.0-7.1%. Overall, borrowers can expect more affordable loan options and potential savings as a result of these rule changes.

What changes are coming to interest rates on loans in Budapest from January 2024? From January 2024, the voluntary interest rate cap for newly concluded contracts will significantly decrease. Banks that adhere to this cap will be able to offer home loans with a maximum total annual cost rate (THM) of up to 7.3%, compared to the current rate of 8.5%. This means lower interest rates on loans in Budapest.

Which banks have joined the voluntary interest rate cap in Hungary? All major domestic financial institutions have joined the voluntary interest rate cap in Hungary. This includes banks in Budapest and other cities.

Will the interest rate cap result in immediate and significant interest rate reductions on home loans in Hungary? Yes, the interest rate cap is expected to have an immediate and significant impact on interest rates for home loans in Hungary. It is anticipated that this will lead to even more favorable offers from banks in Budapest and throughout the country.

Are there currently any home loans with a total annual cost rate (THM) below 7.3% in Hungary? Yes, there are already home loans available with a THM below 7.3% in Hungary. However, these are typically loans with fixed interest rates that have a higher THM. The interest rate cap may lead to the availability of even lower THM loans in Budapest and other locations in Hungary.

What financial benefit can be expected from the interest rate cap in Hungary? The interest rate cap in Hungary can result in significant financial savings for borrowers. For example, a borrower with a net income of 450,000 forints who takes out a 20 million forint home loan with a 20-year term and a 10-year fixed interest rate may save around 8,200 forints per month, or a total of around 1.9 million forints over the course of the loan.

Should borrowers wait for the interest rate cap to take effect before applying for a home loan in Hungary? While waiting for the interest rate cap to take effect in Hungary may lead to more favorable offers, it is important to note that there are already competitive options available. However, it is expected that the interest rate cap will result in even lower interest rates and increased competition among banks in Budapest and across Hungary.

Will the interest rate cap lead to lower interest rates becoming the norm for home loans in Hungary? If banks decide to adjust their interest rates in response to the interest rate cap, it is likely that interest rates below 7% will become more common for home loans in Hungary. The total annual cost rate (THM) includes not only the interest rate but also various fees and costs associated with the loan. Therefore, a lower THM value typically corresponds to a lower interest rate. Additionally, increased competition among banks may further drive down interest rates in Budapest and other locations in Hungary.