Another big change in home savings: Erste has made a difficult decision

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Adapted to changes in customer needs, Erste Lakástakarék decided to suspend the sale of its unsubsidized products and the bridge loan, the bank reported, emphasizing that the financial institution reserves the right to return to the market if demand for the products justifies it. Although only Fundamenta will continue to be sold on the market with the exit of Erste, the figure below shows that, as these are regular savings that require a longer commitment and state aid is still in force for contracts concluded before October 2018, the Market size continues to grow: At the end of 2019, more than HUF 1 billion were already in bank savings accounts for housing.

Although the bank’s response did not mention the reasons for profitability, the figures show that the company made a profit well below its competitors last year: its profit was 348 million HUF compared to Fundamenta 7.0 billion and OTP Housing Savings 3.2 billion. as it does not have a portfolio with state aid as large as its two new competitors as its two competitors. While last year’s acquisition of Aegon Housing Savings Bank’s portfolio may have improved the company’s performance, this cannot be said for the new contracts sold without state support.

When asked, the bank was also told that Erste Housing Savings currently manages nearly 185,000 contracts. Based on its previous announcement, Erste acquired more than 64,000 contracts when it bought Aegon Housing Savings Bank last year, and considering the expiration of these, less than a third of the contract portfolio may have been limited-time at Erste. The measure does not affect the current portfolio, Erste Lakástakarék will continue to be available to its existing clients in connection with contract management in the usual forms and locations. At the end of 2019, it was HUF 145 billion in Erste’s home savings accounts, representing a 13% market share among housing funds after Fundamenta’s 51% and OTP’s 36%.

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Erste suspended the sale of home savings products almost exactly one year after a similar decision by the Prosecutor’s Office. According to Balázs Sándorfi, founding director and manager of Bankmonitor.hu, the reasons for the decision may be the following:

• In addition to the currently available minimum returns, Home Savings (LTP) can only offer the saver a return below inflation,
• the security of the supergovernment, with its annual return offer of 4.95%, displaces the supply of savings funds for housing without state support (which represents an annual interest rate of 1-1.5%),
• Active sales are believed to have already brought in low volumes so it was not necessarily worth keeping them.

Following Erste’s decision, only Fundamenta offers a home savings product, but in their sales logic, the very low fixed rate loan offer associated with LTP is attractive, not to mention that Fundamenta has a sales team dedicated to sell the product, while on the banking side there are numerous other products that can be sold with a longer income duration – Balázs Sándorfi caught our attention and added: on the banking side, credit works perfectly regardless of the LTP.

He drew attention to important information for existing customers: existing contracts are not affected by the decision, they continue to be executed in accordance with the conditions in force at the time of the contract. Existing contract holders have no more shares, especially existing LTP clients who have made savings for housing before 16.10.2018 (even with state support), if they rescind payments due to misunderstanding, they will still fall for these contracts. of a valid state aid of 30% (annually).

Today’s Katalin Novák announcement is an interesting coincidence: 50% of all renovated home renovations will be covered by the state. This is a more advantageous financial offer from the state than previous state support within the construction of the LTP. There, p. Eg In the case of a 4-year construction, the maturity amount available was HUF 1,250,000 for a monthly payment of HUF 20,000, of which the state subsidy represented 23%, while since January 1, HUF 2 million – certified renewal on invoice – HUF 1 million the state pays. Up-front savings will still be required, as 50% of the bill will have to be paid to the owner doing the renovation, and the subsidy is likely to be ex post, so the full amount will need to be temporarily available.

Both Erste and OTP decided to suspend sales only and not exit the market as a whole, which means that under different market conditions (for example, there will be no super government securities or the general interest rate increase, the LTP offer may result in higher returns). sales can resume – the Bankmonitor.hu expert caught the eye.

https://www.portfolio.hu/ingatlan/20201014/novak-katalin-nagy-bejelentest-tett-otthonfelujitasi-programot-indit-a-kormany-452784