Hungarian Banking Association criticized Orbán cabinet’s tax increases

The Hungarian Banking Association expressed concern about the government measures increasing lenders’ burdens by an additional tens of billions of forints, announced partly without prior consultation, on November 28.

The increase in the windfall profit tax, which was to be phased out based on the government’s previous commitment, and the extension of the retail credit rate freeze will harm Hungary’s international competitiveness, weaken the strategic partnership between the government and the bank sector, and undermine market confidence, the association said on Friday.

The retail credit rate freeze is now being extended for the sixth time, which goes against the requirements of responsible consumer behaviour as it rewards the consumers who, despite a series of early warnings, decided to take the risks of variable-rate loans and did not switch to fixed-rate mortgage loans, they said. When market rates increased and those consumer risks turned to reality, the government expected the banks to take the consequences while many of those consumers would have been able to afford the higher repayments.

They also noted that the government-initiated voluntary 5pc interest rate cap programme for retail mortgages, due to start in April 2025, is viable and can have a meaningful impact under the conditions set by the banks.

“The Hungarian Banking Association remains committed to a stable and predictable economic environment, an essential condition for international competitiveness, and is ready to cooperate with the government in developing meaningful and sustainable solutions to strengthen this,” the association said.

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