It is often said, but it is worth examining how much better a home loan is today than a few years ago. And what does this have to do with the fact that BUBOR has become negative this September, which has never happened?
Continuously improving conditions
It is easier to borrow today and mainly to repay, as the interest rate environment is much more favorable. This is also due to the interest rate cut cycle launched by the National Bank in 2017.
It is worth going back a few years to review.
In 2012, the average interest rate on new forint-denominated home loans was 11.9%, while that on fixed-term loans for 5-10 years was 9%.
In 2015, those opting for floating rates enjoyed 4.7% and 5.8% for fixed rates for 5 to 10 years. In practice, this was the “bottom” so far for the latter type.
In 2017, floating rate loans are now available at 3.3%, and longer-term stable loans are charged at 6%, which means that interest rates have risen to a minimum of 0.2%. All this is clear from the MNB’s statistics.
What does this mean in practice?
While in 2012, we were able to repay a $ 10 million, 15-year loan with a monthly payment of 119 thousand and 101 thousand forints, if taken today, the monthly repayment was only 70 thousand and 85 thousand forints. These are very significant differences that affect living standards.
Both new and old home loans will get better and better
So we saw that we got loans cheaper. But what happens to variable interest rates? After all, its installment can increase indefinitely over time.
Here, too, favorable processes have taken place. The reference rate to which the mortgage interest rate is linked has fallen sharply, making it harder but easier to repay loans on a monthly basis in recent years.
The domestic interbank interest rate BUBOR, which defines short-term loans, has fallen into a negative range, so this process is ongoing and there is no sign of a rise.
While the borrower may have repaid the loan twice as much in the past, if ‘the interest ran out’, today it is much more positive: according to current trends, if you take out 10 million forints, you only have to repay 12 million forints. Thus, the risk has decreased over the years as has the interest rate itself.