There is a significant proportion of floating-rate mortgages on earlier mortgages, so switching to fixed repayment schemes this year may be a safe option for affected creditors.
Borrowers themselves are foreclosing one of the home loan schemes from the market. At least that’s what the latest market data suggests, according to Good Finance’s latest summary, based on official central bank data.
The twilight of risky loans
In the first 11 months of last year, banks signed new home loan agreements worth $ 793 billion, up 33 percent year-over-year. “The over 30 per cent growth is no surprise, so long-term growth is visible in the market, ” a loan expert at Good Finance . He added that the latest figures show that the share of the most risky floating rate loans has virtually become marginal for new home loans.
They accounted for only 6 percent of last year’s mortgage loans, while they accounted for 16 percent of new home mortgages applied for in 11 months. “All this shows that borrowers turned to the floating rate home loans from this course role in the Hungarian National Bank steps in one hand, your qualification for the consumer-friendly Home Loans introducing other hand, stricter October to have come into force the inclusion of variable-rate home loans…” – said the expert .
In the case of new mortgage loans
The most significant increase was recorded for 5 to 10 years in the form of fixed repayment plans: the total amount increased by 123 percent to HUF 275 billion. The amount of fixed-term housing loans for 1-5 years increased by 70 percent to HUF 332 billion. In addition to the aforementioned tightening, demand for fixed-term mortgages is explained by the awareness of borrowers.
“More and more people want to be sure , and avoid the increase in installments due to possible interest rate increases due to economic changes,” said Good Finance . Speaking about changes in interest rates and APRs, Erika Trencsán said the average interest rate on fixed-term mortgages for at least one year was 5.36 percent in November last year, up from a modest increase of 5.21 percent a year earlier.
Older home loans can also be replaced by more secure ones
Good Finance’s own data is in line with market trends, and more and more people are looking for fixed repayment mortgages. While the share of risky, variable-rate mortgages on new home loans has dropped significantly, they still have a significant share of more than 50 per cent of previously taken out mortgage and home loans . According to the previously recorded Good Finance floating rate home loans refinancing can be replaced with fixed, particularly those with lots of time left in the race and where a high amount of the principal debt.
“Although loan redemption has not been very popular in the retail banking market so far, demand for it is expected to increase due to the risk of interest rate hikes and growing awareness among debtors. In our experience, well- qualified credit intermediaries are playing an increasingly important role in successful loan redemption processes.”