There will be big changes in lending next year. The MNB and the government are preparing to tighten the conditions. Several limits are put in place to curb over-indebtedness, and loans can be more expensive by regulating interest periods. Is it better to borrow more this year?
The MNB’s decree, which will come into effect in January, will stipulate that the installment may not be higher than 50 percent of the borrower’s declared income for lower earners. The loan-to-value ratio, that is, the amount of credit we can borrow against the value of the home, cannot be more than 80 percent next year. These conditions will be particularly strict for those who cannot justify their full income.
Few people already opt for these, but much stricter JTM limits were set for new loans in euros and other currencies, offsetting the negative effects of a possible exchange rate depreciation: 25% and 10%, and 30% and 15% for high-income clients.
Interest rates may also increase
On the other hand, interest rates may rise next year, if the Fair Banks Act is introduced, banks will only be able to grant loans for at least 3 years (meaning that banks can only change the interest rate on loans every 3 years). This can lead to higher costs as it represents an additional risk for banks compared to short-term loans. This is also evident in our example.
Is it worth borrowing now?
MNB tightening does not really affect credit assessment processes. Except in a few exceptional cases, banks have acted with similar caution so far, and at most the exceptions can now be lifted. A three-year fixed-rate loan is not necessarily bad either, as it brings predictability to customers. It’s not worth borrowing now just to pay off a few thousand forints. Experience has shown that you can save a lot more by choosing the right bank, but if you spend a little more time searching for a home, it can be similarly rewarding.
There is also a positive change
The conditions are not yet known, but the semi-socpol is expected to be available to families next year, so they can get nearly one million forints on a used home. It can even be used as a power source.