February 15, 2017 / 5:01 AM / 6 months ago

Hungarian central bank plans measures to cut mortgage costs - Magyar Hirlap

BUDAPEST, Feb 15 (Reuters) - Hungary's central bank is planning changes in the banking system that would reduce the cost of housing loans, a deputy governor of the National Bank of Hungary told the newspaper Magyar Hirlap on Wednesday.

The changes will address several problems, Marton Nagy said in an interview with Magyar Hirlap. Those are: mortgages offered by different banks are hard to compare, the cost of switching from one bank to another are high, and Hungary's banks aren't as efficient as their international competition.

"The experts of the central bank have started to work in all three areas, and the Financial Stability Council could tackle these challenges in the next few months," Nagy said. The central bank will hold talks with the banks about the planned measures, he added.

The stock of housing loans could grow by more than 1 percent this year and more than 5 percent in 2018, helped by rising wages, employment and a drop in benchmark interest rates, Nagy said.

But the interest rate premium Hungarian banks charge for mortgages is still high compared with banks in other countries, at around 500 basis points.

"Loans are still expensive, price competition is insufficient in the market for housing loans," Nagy said.

Hungary's annual economic growth slowed in the fourth quarter of 2016 to 1.6 percent. Increased lending is vital for the government to ensure that the economy picks up this year, ahead of 2018 elections.

Nagy was the mastermind behind many of the central bank's measures regarding the banking system in the past few years.

The country's banks were hit hard by policies Prime Minister Viktor Orban introduced after he came to power in 2010, which included a big windfall tax on banks and a drive to reduce foreign ownership of Hungarian banks.

But after a landmark agreement in February 2015 in which the government agreed to cut the bank tax and improve cooperation with the industry, lenders turned a corner and they are expected to be profitable in 2017. (Reporting by Krisztina Than, editing by Larry King)

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