End of interest rate cap in Hungary: Repayments could rise significantly from October, experts calculate

Hungarian borrowers are bracing for potential increases in their loan repayment installments as the country's interest rate cap is scheduled to expire in October. Experts have calculated that this change could lead to a significant rise in monthly payments for many.

For loans tied to shorter interest rate periods, such as those with 3, 6, or 12-month BUBOR (Budapest Interbank Offered Rate) commitments, the impact will be felt immediately after their first interest rate adjustment following October 1. Calculations suggest that these borrowers could see their monthly payments increase by 10-11%, translating to an additional 6,300 to 7,100 forints per month for a typical mortgage loan.

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The monthly change: +6,900 forints (an 11 percent increase).

Borrowers with longer interest rate periods, like 3 and 5-year terms, are in a more protected position. Their loans are not directly linked to the interbank reference rate but rather to official interest rate indicators monitored by the Hungarian National Bank (MNB). Consequently, their repayment installments will not automatically increase in October. Instead, their loan rates will be recalculated based on these indicators at their next scheduled contractual review date.

Financial experts like Kata Hargitai-Szabó from BiztosDöntés.hu suggest that the MNB may further reduce its base rate around the time the interest rate cap ends. If this occurs, reference rates and indicators could be lower, potentially mitigating the extent of the repayment increase. However, the portal also notes that while market-rate housing loans are currently available, the difference in cost might not always justify the expense and hassle of refinancing existing loans, especially considering associated fees.

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The monthly change: +6,300 forints (a 10 percent increase).