Hungary Extends Mortgage Rate Cap to Shield Households until End of 2024

Hungary's government has extended the interest rate cap on retail mortgages until the end of 2024 to protect households from rising inflation. The rate cap, initially set in January 2022, has helped mitigate financial strain. The government aims to support economic recovery, as the economy has been grappling with recession.

Hungary's government will extend an interest rate cap on retail mortgages until the end of 2024, its economy ministry said in a statement on Thursday.

The Hungarian government froze retail mortgage rates starting on Jan. 1, 2022 to shield households from rising inflation, which scaled the European Union's highest levels at 25% in January 2023 before easing to an annual rate of 4.0% in May this year. In April Economy Minister Marton Nagy told a conference that phasing out the rate cap would negatively affect a recovery in consumption, adding that the interest rate cap needed to be phased out eventually.

"Without the interest rate cap, families would face a significant increase in monthly repayments," the statement said. Earlier Hungary's central bank said the removal of the rate cap would only cause a significant increase in repayment instalments for a small group of borrowers.

Viktor Orban's government is struggling to revive economic growth as the economy slumped into recession in 2023 and consumption plummeted, with retail sales declining by 3.2% in April, following a year of slow recovery.

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