In the case of new home loans, predictable, fixed repayment plans play the leading role, accounting for 70% of the total, however, taking into account the total retail loan portfolio, they take the lead in floating interest rates and provide 62% of the market.
Interest rates may rise in the future
Which may lead to an increase in the installment payment for those affected. Good Finance calculates that monthly expenses may increase by 10-11 and 16-17 per cent, respectively, with a 2 or 3 percentage point increase in the interest rate on a home loan with a debt of HUF 5 million, which is to be repaid for another 10 years.
You can fight interest rate risk by swapping floating rate loans for a fixed rate facility
There is a gap in the mortgage market, particularly in terms of risks between new and existing loans – the latest compilation by Good Finance , a member of the real estate group, points out that interest rate risk may increase in the coming period. “More than 70 percent of the newly added housing loans provide a fixed installments over several years, thus predictable, secure variable interest rate, however risky, because these short term. – within 3-12 months. – can installment higher if market interest rates start to rise Yet this could happen in the future, especially when a home loan is a decade in the future, “said Erika, a loan expert at Good Finance .
The Hungarian central bank has not yet tightened its monetary conditions, which fundamentally affect lending rates , but may occur at some point in the future, depending on inflation. If this is the case, it may lead to an increase in retail lending rates . In addition, international developments, the series of interest rate hikes the US central bank has already begun and the move by the European Central Bank towards less relaxed conditions are exacerbating interest rate risks .
However, the share of floating-rate retail loans is very significant , according to official central bank data, at 62% at the end of last year.
It is still worth changing the variable to a fixed one
Good Finance calculates that the monthly repayment of a home loan with a current interest rate of 3 percent for another 10 years will amount to HUF 48-49 thousand, however a 2 or 3 percentage point increase in interest may result in a 10-11 and 16-17 percent monthly increase. And the total repayment can increase by hundreds of thousands, or worse, by millions .
According to Erika, home loans guaranteeing a fixed repayment for the longest time, preferably until the end of the term, provide protection against interest rate risk. They are predictable, because even after a possible interest rate increase, the expenditure will not be higher. For existing, risky variable rate mortgages, the solution is for debtors to swap them for a fixed rate loan . It may well be the case that security debtors will switch their floating rate loans to a fixed rate in the future.