Bankmonitor examined how household lending has been forming in neighboring countries and throughout Europe since the outbreak of the crisis. The results are surprising: in Europe, the population’s loan portfolio increased by 20%, however, in Hungary, it fell nearly 15%, origo.hu says.

Since 2008, the population’s loan portfolio increased by 20% in Europe, only with the exception of the Southern European countries. But even in Greece, which was intertwined with the crisis, willingness to borrow is higher than in Hungary.

While the Greek population’s portfolio fell only by 3% in the last 6 years, the decline was 14% in Hungary. Compared with the Visegrad countries, the difference is more striking: the retail loan portfolio grew by 25% in the Czech Republic and by 50% in Slovakia and in Poland, origo.hu says.

Of course, in the case of Hungary, we cannot disregard the fact that more than 90% of the loans before the crisis were denominated in foreign currencies and the weakening of the forint alone increased significantly the public debt. If we do not take into account the weakening of the forint, the decline of the loan portfolio would have been 30%.

Last year, the Hungarian credit market was getting wake up: home loans and personal lending increased significantly too. The former did by 60, the second by 30%. But even these huge numbers sign the takeoff from the bottom of the pit, since both types left behind (by 40-60%) the pre-crisis level.

The absolute level of indebtedness was investigated in two approaches. First, origo.hu viewed the external debt in relation to the total annual wage: how many monthly wages meet the public debt. As shown in the following chart below, loan portfolio is a little more than one year’s earnings in Hungary. This is almost identical to the Central and Eastern European average and less than the Western and Southern European average. The comparison is somewhat distorted by that there are higher rates of illegally paid wages in Hungary than in the other countries of the region.

The second measure of the absolute level of the debt was expressed as a proportion of loan portfolio in the financial savings. In Hungary, total value of the retail credits are 41% of the total savings portfolio. This is almost exactly the same as the Western European average and is also significantly lower than the nearly 50% value of our narrower region.

We can see in both approaches that the public debt is not significant in Hungary. It is important to point out that these figures do not include yet the reducing effect of the HUF 900 billion loan portfolio, which must be paid back by the banks for the public this year’s second quarter. That will reduce by lightly more than 10 percent the individuals’ debt, origo.hu says.

What can the future bring?

It is not sure that people start to rely on lending from one moment to the next. However, there are facts that indicate a gradual revival:

• The interest rate – in parallel with the international trends – is historically low. Credit has never been so cheap. This is certainly not enough to change the willingness to borrow, but undoubtedly a major factor.
• The national real estate prices are low by international standards. It is not unrelated to that the population delayed the purchase of real estate due to its uncertain financial situation assessment in recent years, but is has been showing a gradually improving trend from 2014.
• There are new marriages and births. The necessary purchase of real estate cannot be delayed forever so it can be assumed that the property market turnover, which is on the half of the pre-crisis level, will pick up.
• Banks want to lend again. Increasing the lending became business goal, the “peace agreement” of the government and the EBRD shows a new future for the banking sector. Which the most important is for the public: some banks lend considerably more permissive than a year or two ago.

based on the article of origo.hu
translated by BA

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