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At a low point are past due loans
The MNB has released statistics on non-performing retail loans. On this basis, at the end of September there were 165 billion HUF in loans to households overdue for more than 90 days, which is just one eighth of the maximum at the beginning of 2014. The share of these loans in the total loan portfolio to households is only 2.1%. None of the data was even lower, that is, more favorable in the central bank’s backward statistics to early 2009.
As for the previous crisis, its lingering effects have been partially hidden from statistics: According to the MNB’s May Financial Stability Report, only 18 percent of the nearly 102,000 collapsed mortgage loan contracts remain with banks at late 2019, and the rest largely with debt managers. Furthermore, they are not subject to the general refund moratorium.
Regarding the effects of the coronavirus crisis, 57 percent of the bank’s retail loan portfolio has so far participated in the repayment moratorium., so the payment problems have remained hidden from the banks until now: credit institutions do not necessarily see that someone does not repay because they cannot, or because it is worth staying in the moratorium (in economic terms, due to the lack of compound interest, this is essentially common). . Therefore, it is difficult to predict the expected failure rate.
While a recovery in accounts receivable sales can be expected in a crisis (and the consumer market is now mature enough for this), the moratorium is holding it back as well: the last two quarters have brought exceptional transaction activity. low.
What comes after the moratorium?
Undoubtedly, the expiration of the moratorium means the reinstatement of a contractual repayment obligation for a household. In most cases it will be a repayment charge equal to or close to February 2020, as the interest rate environment has not changed significantly since then. As a result of the moratorium, the term cannot be increased: the term is extended so much that the uniform and interest-free repayment of interest arrears “fits” into the term of the contract. Our example calculations can be read here:
The big question is what comes after the moratorium on non-compliance statistics. We also have to talk about a two-stage output and therefore the effects in two waves:
Considering that only children, retirees, the unemployed and the public can take advantage of it as of January, the MNB estimates that 57 percent of the shares participating in the moratorium could fall to 22-24 percent in January,
From mid-2021, this will be 0 percent from now on. According to the central bank, 820-860 thousand bank clients with a loan portfolio of HUF 1,700-1,800 billion can remain in the moratorium in the first half of 2021:
- Parents of children (520-530 thousand people): 33 percent of those who live with moratorium.
- Retirees (230-240 thousand people): 14.5 percent of those living with the moratorium are over 65 years of age.
- Unemployed (60-70 thousand people): 4 percent of those with a moratorium.
- Public employees (10-20 thousand people): 1 percent of those who live with a moratorium.
The above groups are likely to be over-represented among those potentially struggling to pay back due to the crisis, but they are by no means the only ones in need of a continuation of the moratorium.
According to the latest financial stability report of the MNB
Between 15% and 20% of business loans and 5-10% of household loans are considered vulnerable, but this does not mean that banks can expect such a high default rate.
The expectations of the banks seem to coincide with this, we have died of similar expectations of several banks. And for the relative majority (48%) of the audience at our September 2020 loan conference, by mid-2021, 5-10% of home loans could be past due for more than 90 days, but almost the same amount. expect the rate to be lower.
Those in the moratorium are more vulnerable in every way
According to the results of the MNB survey, the sociodemographic situation of the clients who participate in the moratorium is more unfavorable compared to those who continued to reimburse:
- 27% are under the age of 35, compared to 20% of those who are not,
- 31% of those subject to the moratorium live in small settlements, compared to 27% of those who pay.
- 31% of those participating in the moratorium have tertiary education, compared to 46% of those who continue to pay.
- Regarding the main occupation, 15 percent of the clients who participate in the moratorium are self-employed or part-time employees, compared to 8 percent of those who opt out of the moratorium.
- the proportion of full-time employees is 68 percent for the moratorium and 74 percent for other payers.
The financial conditions of homes with default are also worse. 53% of the households included in the moratorium have incomes below 300,000 HUF, while this proportion is only 35% in the case of those that do not. Forty-four percent of those who use the moratorium have at most one source of income, compared to 34 percent of those who pay. The most vulnerable situation is usually accompanied by lower savings:
83% of households with a default only have enough savings for up to three months, compared to 62% of households with repayments.
The use of the moratorium is currently the most common for personal loans, with more than 70 percent of the June stock affected. Most infant loans were also suspended (65 percent), while the share of home loans was somewhat lower: 45 percent for housing and 53 percent for free use.
Based on the above, it can be assumed that the resumption of the repayment obligation can bring the highest bankruptcy rate for personal loans. At the end of September, even among them, the proportion of loans past due for more than 90 days was only 2.5%.
Cover image: Getty Images
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