Index – Economy – Extension of the credit moratorium

At the meeting of the Operational Personnel for Economic Protection today the following was said:

• The government will extend the credit moratorium to households for some social groups as of January 1 for another 6 months. (Families with children, retirees, unemployed, public employees).
• Companies must apply if they want to extend the moratorium. If their income has been reduced by more than 25 percent, they can take advantage of the moratorium.
• The moratorium is automatically extended for children, pensioners, the unemployed and public employees. They don’t have to do anything, they have to visit their bank if they want to pay despite the moratorium.
• In the case of home and business loans contracted by those affected before the epidemic, the government imposes a termination ban for 6 months.

What you definitely need to know about the credit default

Many were particularly pleased with the introduction of the credit default in March. Due to the coronavirus epidemic, many workers lost their jobs, which was already a heavy burden, but the provision had to focus on one less problem: the moratorium was originally planned until December 31, 2020 for those who applied for loans. Until then, they do not have to pay the refund.

The moratorium was automatically introduced by the government, meaning that it had to be asked specifically if someone did not want to live with it. Based on data from Magyar Nemzeti Bank (MNB)

This means that many of those involved knew and even explicitly wanted to pay off their credit despite the moratorium. However, it is not yet known whether whoever lived with the moratorium was truly financially embarrassed or simply did not want to take action to maintain the payment.

It will not have to be repaid during the moratorium, but the banks will charge interest. The scheme is designed in such a way that the installments cannot increase, except of course for floating rate loans, but your interest rate can change at the end of the interest period anyway. That is, banks cannot add accrued interest to the principal debt by calculating the interest rate. Refunds and unpaid interest at the time of the moratorium will be paid in equal annual installments. This, of course, will extend the term.

For example, a home loan with a principal of HUF 10 million and an APR of 4.5% and a residual maturity of 10 years will have a maturity of five months. In fact, this loan can be repaid 14 months later than originally planned, as it is worth including nine months of moratorium, which is also part of the process.

Otherwise, the interest accrued on this loan will be 354 thousand HUF, according to the bank360.hu default calculator. This cost must be weighed against the fact that the monthly rebate amount can be spent on anything else for nine months. According to the MNB, this means a profit of 70,000 HUF on this loan; This means that the value of the significant amount that can be spent now is greater than the future additional expense that arises due to interest payments.

It is true that Hungarian tourism, especially in Budapest, is in a rather bad state due to the pandemic, the crisis situation has not caused a labor crisis in all areas, which is encouraging for the future. Especially if we take into account that both the banking system and the population are in a much better situation than during the 2008 crisis. The banking system is solid as a rock, the financial situation of the population is better and there is no type risk exchange rate than in the case of loans in foreign currency.

By the way, the moratorium has been introduced in several countries of the European Union. It has expired in many Member States, but has been expanded somewhere, although a specific effort has also been made to find a solution in those areas, focusing on vulnerable lenders.

According to Gergely Fábián, general director of the MNB, this may also be the right decision in Hungary. In Hungary, between 10 and 15 percent of customers living with a moratorium (160-240 thousand retail customers) belong to the vulnerable group, that is, they may face payment difficulties depending on their income and the market situation labor.

Top Image: Prime Minister Viktor Orbán (b) at the Economic Protection Operational Staff meeting in Budapest on September 19, 2020. In addition to the Prime Minister, Mihály Varga is the Minister of Finance. MTI / Prime Minister’s Press Office / Benko Vivien Cher