Budapest, 18 March 2020 – In addition to helping corporate debtors, the Magyar Nemzeti Bank (MNB) has taken several measures also for households to counteract the negative economic impact expected due to the coronavirus pandemic. The MNB calls on the banks to also apply a moratorium on instalments of loans to households considering the extraordinary situation. If the domestic banks do not observe this moratorium, the MNB will request the Government to issue such a regulation. In order to help households overcome any temporary disruption in liquidity, the Bank expects a substantial reduction in the total annual percentage rate of charge (APRC) for newly disbursed personal loans. The MNB will also take the necessary steps within its own competence. In addition to increasing bank’s liquidity, the central bank is exploring options to relaunch the mortgage bond purchase programme to reduce financing costs of housing loans and to temporarily ease its regulations on mortgage bond financing.
The economic effects of the coronavirus also have an adverse impact on households, temporarily affecting the ability of retail customers to repay and take out loans. To mitigate the situation and to minimise the adverse effects, the MNB has decided to take several measures.
The MNB called on the banks to impose a moratorium on the repayment of all household loans similarly to that of corporate customers, having regard to the extraordinary situation, to help households overcome temporary payment difficulties. It is warranted to maintain the moratorium on repayments until the end of 2020. If the domestic banks refuse to maintain the moratorium, the MNB will request that the Government should issue such a regulation.
As households may face liquidity disruptions as a result of adverse economic events, the MNB expects the banks to temporarily make personal loans available that are easily accessible during the current emergency and have a more favourable price than currently; their total annual percentage rate of charge (APRC) may exceed the central bank base rate by no more than 5 percentage points. Banks are also expected to review their general lending practice, their maximum line of credit and their interest charges to improve households’ liquidity situation.
In addition, the MNB expects the banks not to apply the fee and interest rate increases fixed for non-payment over the next 6-month period to account packages and loan products with pricing structures where pricing is subject to the amount of transfers received on the customer’s bank account kept with the given bank. With regard to outstanding housing loans, the MNB calls on the banks to offer borrowers the option of switching to Certified Consumer-Friendly Housing Loan products available with a more favourable interest rate spread and at least 5 years of interest rate fixation.
The risks associated with the deterioration of the labour market and thus the income situation of households can also be alleviated through insurance by debtors and the banks. The MNB therefore expects the banks to offer, in cooperation with insurers, their customers products that reduce the risks of loan repayment at favourable costs and reduced commissions, in particular, unemployment insurance. The banks and insurers are also expected to make these products easily available in such a way that they can provide real, appropriate protection to consumers in difficulty.
In support of new loan placements, the central bank has also taken measures within its own competence. In the near future, the Monetary Council is going to examine options for restarting the mortgage bond purchase programme. Increasing the liquidity of the mortgage bond market and lowering yields will provide the banking system with cheaper, long-term, fixed-rate funds. The MNB expects the banks to apply this reduction in the cost of funds also to the interest payable by households taking out housing loans.
At the same time, the MNB will dispense with imposing more stringent rules on the Mortgage Funding Adequacy Ratio in 2020 as previously planned and will also allow the full inclusion of bank-held mortgage bonds in the ratio.
The MNB recommends that the Government consider, in view of the extraordinary situation, how to ensure that they can be effectively applied also in the case of subsidised household loans. In the case of the Family Home Creation Allowance and prenatal loans, it is warranted to extend the time limits for having children.