Background information

Under Section 1 of the 47/2020 (18 March) government decree and 62/2020 on detailed rules concerning the payment moratorium, the reason for the measure is to alleviate the adverse effects of the coronavirus pandemic during the period Hungary is in a ‘state of emergency’ announced by the government on 11 March. The goal is to protect people who lose their income because of the pandemic and cannot make debt repayments. Another goal is to keep lending activities afloat despite the crisis.

Content of measure

Every commercial loan, mortgage or other loan contract signed before 2020 March 18 will receive a freeze on loan repayments, capital repayment and any related fees until at least 31 December 2020 (can be extended). The length of the loan will be extended by the period of the freeze. The Banking Association said the interest on deferred loan payments would amount to about HUF 450 billion in the 9-month period, but our estimations based on partner interviews suggest it would be at most half of that amount. Clients must sign a statement (online) to opt out of the payment freeze scheme, so the default is that they do get the suspension.

Use of measure

Hundreds of thousands of people or about 30-50% of credit clients have indicated to their banks until April 2020 that they would not avail of the payment freeze option and continue to make payments as before. The prediction of the National Bank of Hungary on the uptake was about 30% of all individual clients at the time. In its inflation report of June 2020, the National Bank of Hungary said that the loan suspension for individuals managed to serve its purpose of replacing lost income so that consumption could stay level or flatten out. Out of a total of about HUF 1,100 billion (€3.274 million) in household loan repayments eligible for the deferral, HUF 600 billion worth of repayments were requested for deferral under the scheme. The bank estimates that 50-70% of the amount freed in this way was spent towards consumption by households (private individuals). In March 2021, some 1.6 million individuals benefitted from the payment freeze. This amounted to HUF 4.2 billion or 42% of all loans (54% of retail loans). Analyses warned that many people who opted for the payment freeze and continue to stay in the scheme have not been sufficiently informed that in some cases this could mean that their loan will be extended not only be the time of the freeze period but, by many more months, even years. This is due to the fact that monthly repayments cannot be raised, but interest rates do rise during the period. It is clear from banks' records that it is the lower educated and lower earners who have opted to use the loan deferral scheme in larger numbers.

Target groups

Workers	Businesses	Citizens
Does not apply to workers	Does not apply to businesses	Applies to all citizens

Actors and funding

Actors	Funding
National government Company / Companies	Companies

Social partners

Social partners' role in designing the measure and form of involvement:

	Trade unions	Employers' organisations
Role	Unknown	Unknown
Form	Not applicable	Not applicable

Social partners' role in the implementation, monitoring and assessment phase:

• Unknown
• Main level of involvement: Unknown

Involvement

Unknown.

Views and reactions

The Banking Association was consulted about the measure prior to announcement.

Sources

• 18 March 2020: Government decree 47/2020 (EN)
• 19 March 2020: Banking Association on the loan payment moratorium (press release) (www.bankszovetseg.hu)
• 24 March 2020: Government Decree 62/2020 (EN
• 14 April 2020: Banks: Hundreds of thousands continue loan payments despite freeze optio (bank360.hu)
• 25 June 2020: MNB Inflation Report June 2020 pg22
• 21 October 2020: Extended loan moratorium - all you need to know (hvg.hu)
• 22 October 2020: Extension of loan moratorium until 30 June 2021 (jogaszvilag.hu)
• 22 December 2020: Govt decree 637/2020 on general extension of loan payment freeze
• 29 December 2020: What can you expect with the moratorium extension?
• 01 January 2021: Govt decree 107/2020
• 09 April 2021: "Magic" loan repayment freeze could mean trouble for tens of thousands (merce.hu)