Survey on Non-performing Home Loans

The National Bank has released a survey of non-performing mortgages and debtors taking them. From this I make some interesting points. (You can read the original here.)

The proportion of non-performing loans (ie those that are not paid at least 90 days) is close to 25% and 140,000 credit transactions amount to HUF 1,450 billion, which is 5% of Hungary’s total GDP. This is a very significant amount, which is why the MNB conducted this survey on how and to whom a solution could be found.

(As we will see, due to the high average age, extending the maturity is not a solution, and due to the huge number of homes on the market, it would not be a good thing and the willingness of debtors to pay also leaves much to be desired.

I collected the main data from the publication

bank

Half of the debtors pay less than HUF 50,000 a month and 81% pay less than HUF 100,000 a month. Half of the debtors pay less than 5.8%, with the average interest being between 3% and 7%. The median remaining term is 12 years.

The values ​​for non-paying debtors are similar. (Median: $ 50,155, Average: $ 91,293. What’s the difference between median and average I’ve already written here: Median or Average?)

The relationship between interest rate and non-payment has not been established, ie someone is not paying because the interest rate is high.

More than two-thirds of non-performing debtors are over 40 and one-fifth will retire before the loan expires. (Therefore, the term of default cannot be solved by extending the term, the average debtor is simply too old for a 30-year loan.)

Three-quarters of non-paying debtors have a medium level qualification

bank

(32% vocational training, 23% vocational secondary school, 18% high school) and 11% have a diploma.

70% of the real estate behind the non-performing loans is located in a smaller town, while only 50% would be justified based on the total number of properties. The reason is that it is not, or only very difficult to sell real estate in these settlements. Thus, selling is not necessarily a solution for debtors due to lack of demand.

Two-thirds of hedging properties have a turnover value of less than HUF 10 million and 10% are more valuable than HUF 20 million.

According to the number of units, debt is higher than 28% of the mortgage loan value (80-90% of the market price) of problem loans, but by the amount it is already 48%. (There are many small loans where, of course, the loan is below the collateral value.) Although the average loan amount was 68% based on the value of the real estate at the time of the loan, the outstanding debt increased by more than 100%.

By country, there were more real estate transactions in Central Hungary in 2014 than there were mortgaged home loans, but in Northern Hungary, for example, the number of properties behind a non-performing home loan was twice the total number of homes and homes sold in the region.

So banks are not in an easy position to get rid of unpaid homes. Even if homes were put on the market for a 5-year breakdown, new real estate would still be on the market, representing 20-40% of total annual sales, with guaranteed high downward pressure on prices.

Moving to a smaller apartment is an easy alternative

Moving to a smaller apartment is an easy alternative

Especially in county towns and in the capital, while elsewhere there is little supply and traffic and there is no such price difference between a house and an apartment.

In 40% of households, credit debt reaches half of total assets, and in 20% it exceeds it.

25% of non-paying debtors have no declared income. (But the ratio is nearly the same for paying loans, meaning many of our compatriots pay their mortgage on paper for nothing.)

Nearly one-fifth of non-paying debtors have a monthly repayment of less than 30% of their official income, and 10% of their total debt is no more than 48 months of income.

In this case, the debtors do not know, but do not want to pay their loan. (Looking at 50% of income and 6 years of income, a much larger number of debtors would fall into this category.)

According to the survey’s questionnaire, debtors would consider only 25% of their income as a monthly loan repayment acceptable. They probably had to pay more than that at the time of the recording, since then they think differently.

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