New rules shall apply for the determination of the Debt Service-to-Income Ratios for Installment Payments (“JTM”), as effective of 1 July 2023.
According to the ‘debt brake’ rule in the NBH Decree No. 32/2014 (IX.10.) on the Regulation of the Debt Service-to-Income Ratios for Installment Payments and the Loan-to-Value Ratios (“Regulation”), the installment payment of the loans drawn down may only be extended to a certain percentage of the customer’s income, and therefore the amount of the loan the customer can apply for is limited. For this calculation, the amount of the customer’s expected monthly installment payment is divided by the amount of his/her verified monthly net income.
The scope of the Regulation, as previously, did not cover loans of less than HUF 300,000, which threshold now is increased to HUF 450,000 with the current amendment. This provision provides relief for borrowers in respect of smaller loans, and may be more relevant in the case of personal loans in particular.
The amendment also introduces changes to the definition of the income threshold. The previous HUF 500.000,- verified monthly net income will be increased to HUF 600.000,-, thus adjusting the scope of application of the more favourable rules.
Therefore, in the case of loans applied for after 1 July 2023, for the income below HUF 600,000, the 50% of the income can be used for installment payments, while for the income over HUF 600,000, the installment payments can be 60% of the income.
In addition to the above changes, the monthly installment payments of all other outstanding loans to respective customers, and the length of the interest period relating to the loan drawn down will continue to be taken into account when determining the JTM.
As regards liabilities secured by mortgages, the new amendment does not contain any changes, so the previous provisions remain in force.
The above provisions shall be applied by all the financial institutions, which pursue credit and loan operations on a commercial scale, in order to ensure continuity in the payment of installments by the customers.
As result, it can be concluded that the amendment of the rules will only affect customers with certain amount of income, but for them the change may significantly reduce the amount of loan they can apply for.