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National Bank hints at rate hike

May 29th, 2021

As the Hungarian National Bank announces plans to raise the base rate to keep inflation at bay, a left-wing analyst fears that families will be in trouble if they need to pay higher interest on mortgages.

The National Bank hinted that it would start to raise the Hungarian base interest rate from June, in order to slow down inflation, which reached 5.2 per cent year-on-year in April. After the National Bank’s announcement, the Forint strengthened significantly against the Euro. In the meantime, Prime Minister Orbán announced the extension of the mortgage repayment moratorium until the end of August. The Prime Minister also hinted that the moratorium may be prolonged until the summer of 2022 to help Hungarian families.

Népszava’s Zsolt Papp acknowledges that the National Bank has no choice but to raise the interest rate in order to slow down inflation. The left-wing commentator, however, fears that higher interest rates will increase the burden on families with loans, as well as companies. Citing the analysis of the GKI economic think tank, Papp notes that 15 to 20 per cent of families with mortgages may not be able to meet their debt obligations. In light of this, Papp takes it for granted that the government will maintain the mortgage repayment moratorium until the 2022 Parliamentary election. Papp fears that this measure will not solve the problem, and, unless the government offers meaningful and systemic help, many debtors will become insolvent.

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