The Hungarian Banking Association is preparing new proposals regarding the future of Hungary’s mortgage rate cap as part of an ongoing public consultation process, according to András Becsei, Vice President of the association and Deputy Chief Executive of retail banking at OTP Bank.
Speaking at a background briefing, Becsei cited data from the Hungarian National Bank (MNB), which shows that approximately 220,000 mortgage contracts currently fall under the interest rate cap scheme.
Of those borrowers, around 19,000 are considered vulnerable under the central bank’s criteria. According to the MNB’s definition, this category includes debtors whose monthly repayments would increase by at least 5,000 forints if the rate cap were removed and whose debt-service burden exceeds 40 per cent of their income, as well as borrowers who have become pensioners since the measure was introduced.
Becsei said the stakes remain significant for the banking sector and expressed hope that legislation maintaining the current conditions of the rate cap until 30 September would be adopted in the coming weeks.
Under International Financial Reporting Standards (IFRS), banks must immediately account for changes in expected cash flows. Based on MNB estimates, extending the measure could result in a one-off sector-wide accounting loss of approximately 125 billion forints.
However, Becsei noted that some institutions may be required to apply a stricter interpretation. If banks conclude that the loss of interest margin will remain permanent, the accounting impact could reach as much as 300 billion forints across the sector. He added that these losses could later be reversed if regulations change or as the affected loans mature.
The banking executive recalled that the introduction of the rate cap at the end of 2021 came as a surprise to lenders, despite years of efforts by banks to encourage customers with variable-rate mortgages to switch to fixed-rate products.
Together with several other financial institutions, OTP Bank has challenged the measure before the Constitutional Court of Hungary. Becsei said a new submission was filed in May, six months after the latest extension, and that the court has accepted the case for review.
He acknowledged that the measure served a clear purpose during the interest rate shock of autumn 2022, when Hungary’s base rate rose to 18 per cent.
According to the banking sector’s own calculations, around 10,000 borrowers would require continued protection from market conditions. Banks are therefore working on proposals that would focus assistance on the estimated 10,000 to 19,000 vulnerable customers identified through objective criteria.
Becsei also noted that falling Hungarian bond yields have recently contributed to a process of interest rate convergence, creating a more favourable environment for borrowers.
Last week, Finance Minister Kármán András announced that the mortgage reference rate cap, originally introduced for six months in 2022 and extended indefinitely from 17 April 2026, would remain in force under its current conditions until 30 September, provided Parliament approves the government’s legislative proposal.
The minister said the government intends to use the intervening period for extensive consultations with industry stakeholders and civil society in order to design more targeted support measures for borrowers who genuinely need assistance.
The draft legislation is currently undergoing public consultation.
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