Hungary central bank says banking system stable, but housing market risks rose

Since the start of a state-subsidized mortgage programme last September, the average loan-to-value ratio of ‌borrowers increased from 59 per cent to 68 per cent, the bank said. At ‌the same time, house prices appreciated by 23.5% in nominal terms in 2025, and housing market overvaluation increased to 22.5%, it said.

Hungary's ​banking system remained strongly capitalised in ‌2025 ​but risks in the housing market have risen, the National Bank of Hungary (NBH) said on Tuesday.

"Developments in the ‌household loan market require close monitoring," the bank said in a financial stability report. Since the start of a state-subsidized mortgage programme last September, the average loan-to-value ratio of ‌borrowers increased from 59 per cent to 68 per cent, the bank said.

At ‌the same time, house prices appreciated by 23.5% in nominal terms in 2025, and housing market overvaluation increased to 22.5%, it said. "Overvaluation increases the risk of a house price correction, which would ⁠also ​have an adverse ⁠impact on loan coverage," the NBH said.

"However, the average debt-service-to-income ratio (DSTI) of borrowers did not rise, despite ⁠the increased contract sizes, which mitigates loan defaults, and the instalments of loans are fixed for ​the entire maturity," they wrote. The subsidized mortgage programme was introduced last ⁠year by the government of then Prime Minister Viktor Orban who lost an election in April 2026. ⁠Orban ​struggled to revive Hungary's economy from an inflationary surge following Russia's February 2022 invasion of Ukraine.

A few months before the election, the previous government launched a ⁠subsidised mortgage scheme for first-home buyers, offering loans worth up to 50 million forints ($151,062) ⁠at 3% interest with ⁠a 10% down payment and for a maximum of 25 years. Orban's government had estimated the annual cost of the cheap ‌mortgage ‌initiative at $443 million.