Mortgage interest rates capped

The leading independent online business news outlet doubts that the government’s decision to freeze mortgage interest rates will help to keep surging inflation at bay.

On Wednesday, Prime Minister Orbán announced that in order to fight inflation, the government will freeze mortgage loan floating interest rates at October levels until mid-2022. This will ease the debt burden of 470 thousand people, whose installments would otherwise have been 20 to 25 per cent more.

Portfolio describes the interest rate cap introduced a couple of months before the election as a move more rational politically than in strictly economic terms. The business site believes that the decision will do little to slow down inflation, as rate hikes by the National Bank will not impact consumer spending.  However, Portfolio also remarks that the National Bank can now raise the base rate without fearing popular discontent, and thus attract more deposits from commercial banks. This should reduce the money supply and, consequently, demand – and thus could help curb inflation. Meanwhile, borrowers will be temporarily shielded from one of its consequences, at least in the short run, Portfolio concludes.

Tags: debt, inflation, National Bank