Orban’s mortgage freeze triggers biggest banking rout of pandemic
(Bloomberg) – Hungarian Prime Minister Viktor Orban orders a freeze on residential mortgage rates as he seeks to build support ahead of the election. Shares of the country’s largest bank have fallen the most since the pandemic hit the country last year.
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The government will cap mortgage rates at October levels for six months starting in January, Orban said in a video on his Facebook page on Wednesday.
The prime minister has already capped fuel prices and announced increases in pensions and minimum wages ahead of the tight parliamentary poll scheduled for around April. The latest mortgage measures aim to further ease the pressure on families as inflation accelerates, Orban said.
“We have to create a new line of defense,” he said. “We are going to freeze interest rates for households.”
Shares in OTP Bank Nyrt. fell 7.6% at the close in Budapest, the highest since March 2020, causing the benchmark BUX to fall 2.9%. The forint weakened 0.3% to 368.4 per euro, remaining near a record low.
The 3-month Bubor interbank rate, the benchmark for most variable-rate mortgage loans, stood at around 2% at the end of October. But it has since come close to 4% following a series of interest rate hikes.
Central bank data shows that 36% of residential mortgages had variable interest rates as of June 2021. There were 4.5 trillion forints ($ 13.9 billion) of residential mortgages outstanding in total in October, according to a separate report from the regulator.
The central bank declined to comment on how Orban’s decision might affect his campaign to tighten interest rates.
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