FINANCIAL MARKETS AND INTEREST RATES
4.2 Credit conditions in the financial intermediary system
The lending survey7 draws a mixed picture of lending conditions: in the household segment following broad-based tightening some adjustment took place, while tightening continues in the corporate segment. Interest rates on HUF-denominated corporate loans rose slightly, whereas those on EUR loans declined between April and July 2012. In the household segment, the rise in mortgage lending rates came to a halt, but the interest rate is at an extremely high level, which is also reflected in low new loan volumes. The real interest rate on one-year government securities declined slightly as a result of the continued decrease in government securities yields.
Chart 4-10
Interest rates on corporate loans by denomination*
(March 2005−July 2012)
0 2 46 8 1012 14 16
0 2 46 8 1012 14 16
2005 2006 2007 2008 2009 2010 2011 2012 Per cent Per cent
Interest rate of HUF-denominated loans Interest rate of EUR-denominated loans
* 3-month moving average of monthly interest rate data.
Source: MNB.
Chart 4-11
Interest rate spreads on corporate loans by denomination*
(January 2005−July 2012)
−1.0−0.50.00.51.01.52.02.53.03.54.0
−1.0−0.50.00.51.01.52.02.53.03.54.0 2005 2006 2007 2008 2009 2010 2011 2012
Per cent Per cent
Interest rate spread of euro-denominated loans Deposit rate spread of euro-denominated loans Interest rate spread of HUF-denominated loans Deposit rate spread of HUF-denominated loans
* The spread on the moving average of the 3-month BUBOR and EURIBOR, respectively.
Source: MNB.
7 http://english.mnb.hu/Kiadvanyok/hitelezesi_felmeres/SLO-on-bank-lending-practices-august-2012
8 The difference between tightening and easing banks weighted by market share. The ratio does not show the magnitude of tightening/easing.
MAGYAR NEMZETI BANK
QuARTERlY REpoRT oN INflATIoN • SEpTEMBER 2012
56
three-month moving average was around the level of 12 per cent between April and July 2012 (Chart 4-12), which corresponds to a 5 per cent interest rate spread on the BUBOR (Chart 4-13). By contrast, in the case of traditional commercial bank transactions (excluding home savings and loan associations), the APR declined from 13.5 per cent to 12.9 per cent, while the interest rate spread was down from 6.2 per cent to 5.9 per cent. However, these levels can still be considered extremely high, which is also reflected in the extremely low new loan volumes.
Within consumer loans, the earlier interest rate increase of home equity loans stopped at a level of around 15 per cent.
As a result, the interest rate spread rose from 7.5 percentage points in April to 7.9 percentage points in July.
The interest rate on unsecured consumer loans continued to decline from 29 per cent in April to 28 per cent in July 2012 (Chart 4-12), owing primarily to hire purchase loans.
In the case of housing loans, the high interest rate level may be somewhat reduced by the state interest rate subsidy programme, which provides a gradually declining state subsidy for the debtor for five years. The programme was amended in mid-July, as the maximum level of the interest rate that can be charged on these subsidised loans was raised, making the scheme more attractive for the banks that had been passive in the first half of the year. As a result, the maximum interest rate might be 13 per cent, of which the client pays the portion remaining after the deduction of the interest rate subsidy for five years, which is around 9 per cent in the beginning (in the first year), and amounts to around 10–10.5 per cent towards the end of the interest rate subsidy period.
In accordance with the expectations presented in the previous lending survey, in the case of housing loans 25 per cent of banks in net terms, whereas in the case of consumer loans 7.5 per cent of them reported that they had eased their credit conditions (Chart 4-14). The easing was mainly reflected in the higher allowed payment-to-income ratio and the loan-to-value (LTV) ratio. This represented some adjustment of the extensive tightening experienced at end-2011. At the same time, for 2012 H2 banks expected further adjustment only in consumer loans.
Chart 4-12
Changes in credit conditions and factors contributing to changes in the corporate segment*
(APR, January 2005−July 2012)
5
2005 2006 2007 2008 2009 2010 2011 2012 Per cent Per cent
Housing loans
Housing loans (excl. HSLA) Home equity loans Other (unsecured) loans
* 3-month moving average. HSLA is the abbreviation of Home Savings and Loan Associations. Prior to 2009 HUF denominated mortgage lending was marginal.
Source: MNB.
Chart 4-13
Smoothed spreads over the 3-month BuBor*
(January 2005−July 2012)
2005 2006 2007 2008 2009 2010 2011 2012 Per cent Per cent
Home equity loans Housing loans
Deposit
Housing loans (excl. HSLA)
* 3-month moving average. HSLA is the abbreviation of Home Savings and Loan Associations. Prior to 2009 HUF denominated mortgage lending was marginal.
Source: MNB.
FINANCIAL MARKETS AND INTEREST RATES
4.2.3 developMentS In real IntereSt rateS
Since the previous Quarterly Report on Inflation, the one-year real interest rate calculated on the basis of the government securities yield continued to decline, from 2.7 per cent in May 2012 to 2.6 per cent in July (Chart 4-15). The change was mainly attributable to the continuing decrease in the one-year government securities yield, while inflation expectations remained almost unchanged. The real interest rate calculated from deposit rates with maturities of up to one year remained practically unchanged in the period under review and continued to be around 2.3 per cent. The real interest rate level remains higher than the average of the previous two years, although it can be considered historically low.
Chart 4-14
Changes in credit conditions to the household sector*
−80
−60
−40
−20 0 20 40 60 80 100
−80
−60
−40
−20 0 20 40 60 80 100
05 H1 06 H2 08 Q1 09 Q2 10 Q1 10 Q4 11 Q3 12 Q2 05 H1 06 H2 08 H1 09 Q2 10 Q1 10 Q4 11 Q3 12 Q2
Housing loans Consumer loans Per cent Per cent
TIGHTENINGLOOSENING
* Net percentage balance of respondents tightening/easing credit conditions weighted by market share.
Source: MNB based on banks' responses.
Chart 4-15
forward-looking real interest rates (January 2005−July 2012)
−1 0 1 2 3 4 5 6 7 8
−1 0 1 2 3 4 5 6 7 8
2005 2006 2007 2008 2009 2010 2011 2012 Per cent Per cent
1-year real interest rate based on deposit rates**
1-year real interest rate based on zero coupon yield*
* Based on the one-year forward-looking inflation expectations of analysts calculated by the MNB using the 1-year zero coupon yield and the Reuters poll.
** Based on the one-year forward-looking inflation expectations of analysts calculated by the MNB using deposit rates with maturity up to 1 year and the Reuters poll.
Quarterly report on inflation • September 2012
58
5.1.1 ChanGeS In the eXternal BalanCe of hunGary
The external financing capacity of the Hungarian economy declined slightly in Q1, but continued to be significant. The combined current and capital account surplus was around 3.5 per cent of GDP (Chart 5-1). Despite the slowdown in external economic activity, the surplus of foreign trade remained significant, which may have primarily reflected the effect of subdued domestic demand. In Q2, based on foreign trade data, net exports may have already significantly been supported by a pick-up in vehicle production and − as indicated by retail sales − the continued decline in consumption.
At the same time, a significant adjustment primarily affecting current transfers was observed in Q1 in the balance of transfers, which is mainly influenced by EU transfers. Following the high use of net EU transfers in Q4, which exceeded EUR 1.7 billion, domestic agents used only EUR 0.7 billion of EU funds in Q1.
The decline in the balance of transfers was partly offset by the slight decline in the deficit on the income balance. This is primarily attributable to the decrease in interest expenditures transferred abroad. In Q2, the deterioration in the income account was also a result of the fact that after 2009 MOL paid dividends again, a part of which was transferred to its foreign owners.
The external surplus of the Hungarian economy declined slightly in 2012 Q1, amounting to nearly 3.5 per cent of GDP. The decline was primarily attributable to the decrease in the use of EU transfers. By contrast, the indicator calculated from the financial account indicated a small financing requirement. In terms of the structure of external financing, the outflow of debt type liabilities and the inflow of non-debt type funds continued. A further adjustment of Hungary’s external debt indicators was observed in Q1, which was also supported by the appreciation of the exchange rate, in addition to the continued outflow of funds. Partially available Q2 data indicate a further increase in the external surplus, in parallel with which the outflow of funds may also have continued.