BUDAPEST: Hungary is to offer borrowers with variable-rate loans the opportunity to switch to fixed-rate products, a central bank deputy governor said on Friday, as part of efforts to curb the risks from future interest rate changes.
The move, by the National Bank of Hungary and the Hungarian Banking Association, is similar to a previous initiative which replaced foreign currency loans with forint loans.
Central bank Deputy Governor Laszlo Windisch said almost all newly-issued loans were at a fixed rate of interest for at least part of the lending period, but new measures were needed to tackle outstanding variable-rate loans.
"There is a risk, which clients either understand, or they do not," Windisch told a banking conference. "Still, the risk (of a change in interest rates) is passed on to the borrower."
"In close co-operation with the Banking Association, we will launch a joint programme in the spring, sending a personalised offer to each client affected," he said, without going into further detail.
Outstanding consumer credit grew by 424 billion forints ($1.49 billion) last year, an annual increase of 7.3 percent from a year earlier, central bank data showed.
Demand for new loans is driven by a general economic upswing, record-low unemployment and a housing boom, which is fuelling demand for mortgages.
Mortgage lending increased by 31 percent year-on-year in 2018, the central bank said, adding that the interest on more than 60 percent of mortgages issued in the fourth quarter was fixed for a period of more than five years.
Hungary's central bank raised its overnight deposit rate by 10 basis points to -0.05 percent last week, halting a nearly seven-year run of monetary easing.
The bank said its next move could be either tightening or loosening, depending on the inflation outlook.
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