Published: December 01 2023
Interest rate caps, also known as kamatstop in Hungary, have been a topic of discussion in recent years. These caps have a direct impact on the interest rates of consumer loans and can sometimes be confused with similar terms. In this article, we will clarify the differences between various interest rate caps and explain how they affect different types of loans.
Kamatstop is a temporary measure introduced by the Hungarian government to limit the interest rates on variable interest rate loans, specifically for home loans and corporate loans. Initially implemented in response to the economic impact of the COVID-19 pandemic, these caps have been extended multiple times and are still in effect. The kamatstop sets a maximum limit on the reference interest rate that can be used for calculating loan interest, preventing it from exceeding a specified value.
Impact on Home Loans
The kamatstop for home loans primarily applies to existing variable interest rate loans and new contracts with a maximum one-year interest period. The reference interest rate used in these contracts cannot be higher than the value set on October 27, 2021. Originally planned for a six-month period, the kamatstop has been extended and expanded to cover additional loans. As of the latest announcement, the kamatstop for home loans will remain in effect until July 1, 2024, with unchanged conditions.
Impact on Corporate Loans
In addition to home loans, the Hungarian government introduced a kamatstop for small and medium-sized enterprises (SMEs) in the fall of 2022. This measure applies to corporate loans and restricts the interest rate calculation to a reference rate determined on June 28, 2022. Loans taken after November 15, 2022, must adhere to this limit as well. The kamatstop for corporate loans has also been extended multiple times and will continue until April 1, 2024.
Other Interest Rate Caps
Apart from kamatstop for home and corporate loans, there are also specific caps for student loans and deposit accounts. For student loans, the government implemented a kamatstop that sets a maximum interest rate of 4.99% until July 2023, and then increased it to 7.99% starting from July 2023 until July 1, 2024. The kamatstop for deposits aims to prevent excessive returns on investments due to high inflation. However, this measure only applies to certain institutional investors and retail customers with deposits of at least 20 million Hungarian forints.
Understanding interest rate caps in Hungary is crucial for borrowers and investors alike. The kamatstop measures implemented by the government have provided temporary relief to borrowers, ensuring that loan interest rates remain within set limits. However, these caps have also faced criticism from financial institutions and the central bank due to their potential negative impact on the banking industry and overall financial culture. As the Hungarian government continues to evaluate and extend these measures, it is essential for individuals and businesses to stay informed about the latest developments in interest rate regulations.
Questions & Answers
=== What are some of the terms related to interest rate caps in Hungary? Some terms related to interest rate caps in Hungary include kamatstop, THM-plafon, and önkéntes kamatplafon.
How has the government influenced the lending market in Hungary in recent years? The government has introduced various measures to influence or restrict the lending market in Hungary, citing exceptional economic circumstances. These measures have been in effect since the appearance of the coronavirus pandemic in Hungary in spring 2020.
What is kamatstop? Kamatstop is a temporary interest rate cap introduced by the government that applies to existing variable-rate mortgage loans with a maximum one-year interest period. It limits the reference rate used in the loan agreement to the value on October 27, 2021. It was initially planned for 6 months but has been extended multiple times and expanded to include additional loans.
What loans are affected by kamatstop? Kamatstop applies to variable-rate mortgage loans, housing finance leasing contracts, and non-subsidized mortgage loans with fixed interest periods of up to 5 years, all of which are considered relevant to housing purposes. The loans must use a reference rate that is no higher than the value on October 31, 2021. The government has announced that kamatstop for mortgage loans will be extended until July 1, 2024.
Are there interest rate caps for corporate loans as well? Yes, the government has also implemented interest rate caps for corporate loans. The kamatstop for small and medium-sized enterprises (SMEs) applies to their corporate loans, where the interest rate must not exceed the reference rate determined on June 28, 2022. The government has extended this kamatstop multiple times, with the current extension in effect until April 1, 2024.
Is there an interest rate cap for student loans? Yes, the government has implemented an interest rate cap for student loans. The kamatstop for student loans sets the interest rate at 4.99% until July 2023, and it was subsequently extended until July 1, 2024, at the same interest rate.
How have the interest rate caps affected the banking sector in Hungary? The interest rate caps have resulted in significant unpaid interest for both individual borrowers and SMEs. According to calculations by the Ministry of Finance, more than 330 billion forints of interest were not paid by borrowers. However, the government does not compensate banks for this loss of revenue.
Is there an interest rate cap for deposits as well? Yes, there is a kamatstop for deposits that is currently in effect until December 31. It aims to prevent excessive earnings from deposit interest rates due to high inflation. This kamatstop applies to institutional investors, such as pension funds, housing savings cooperatives, insurers, and investment funds, as well as retail customers with at least 20 million forints in short-term and maximum one-year deposits.