Nowadays, thanks to the financial crisis of 2008, the average person is completely uncertain whether he would get a loan from his bank if he was going to buy real estate. You can find out all this in our home loan menu item. Home loan interest rate, base rate, interest rate premium, and everything related to the topic.
Fortunately, today the situation looks completely different. Commercial banks are fighting to the fullest for home loan applicants. Customers are quite happy with this, as they are the main winners in this competitive situation, as the average mortgage interest and loan charges may drop by as much as HUF 1 million compared to a year ago.
What are the reasons for the falling and regulated mortgage interest rate?
It is nothing more than the introduction of the “debt brake” that came into effect in 2015 and the introduction of the FAIR Bank Act . These regulators make it mandatory for banks to include elements of responsible lending, such as examining the maximum portion of a mortgage applicant’s income that can be used to repay the loan and the maximum payload of the property.
Home loan interest rates are also subject to stricter regulations.
In the case of the former, the rule is easy to follow: the individual’s certified net monthly income below HUF 400,000 can be charged up to 50% above HUF 400,000 up to 60% with the monthly installment of the home loan.
The retail clientele already has a bitter experience
In this case, unfortunately, the retail clientele already has a bitter experience with over-lending to a given income, so the internal brake on mortgage borrowers works more than the official regulator.
As stated above, banks will primarily determine the interest rate of the home loan they wish to raise, depending on the customer’s certified income and the amount of the loan in relation to the value of the property. If you are curious as to what conditions can take a housing loan.
The decline in mortgage lending rates was triggered by two main factors: the drastic decline in the central bank base rate and, to a lesser extent, the moderate hunger of lender interest rate spreads. (although the drop in the base rate was not followed directly by the banks including interest on the premium, ie the banks were not yet living well akt)
As a result, in 2015, commercial banks may already be seeing rates below 5% for the best mortgage rates offered to their best clients.
As banks are currently only granting loans in forints at home
The only risk that has to be borne in mind in the long term is the increase in interest rates. This risk must be taken into consideration in the case of a 15-20 year product.
Changes in European (ECB) and American (US-Fed) key interest rates affect the Hungarian interest rate. At the current juncture, analysts in Europe are not expecting a significant increase in interest rates for at least the next year.
However, it cannot be stressed enough that current interest rates are at historical lows, so further reductions are not really expected, the more it is worth considering the effects of a possible increase.
For example, a 1 percentage point (or 1%) increase in interest rates can result in up to 5-8% increase in a customer’s monthly installments, of course, depending on maturity and current interest rate.
Nowadays, banks also provide a solution to protect their monthly installment from possible increases in mortgage rates.
This is a fixed interest rate fixed for 10-15-20 years. In this case, they charge an average interest rate of 2% higher than the interest rate on a “normal” home loan. Of course, this “insurance” comes with a price: it can mean approximately 15 percent more monthly repayments.