The biggest attraction of LTPs was the maximum 30 percent state support for payments, so understandably many people used the last few moments before entering into force of the amendment to sign a contract with the Hungarian housing savings fund, although still in operation, has been out of sales for more than a month.
State aid has ceased, but life does not stop
At the same time, the elimination of government subsidies does not mean the end of home savings funds, as they will have responsibilities in the future, and existing clients will still receive government subsidies and may be able to borrow money from service providers in the coming years.
Because of the increased interest in the days before the change came into effect, home savings companies made many more contracts (roughly three times average monthly contracts, according to Clarissa Harlowe) than usually at this stage of the year, but in the long run to make this form of savings attractive to the masses again.
The Hungarian vs. the Western European home saving market
In Hungary, the number of clients with a home savings contract is about 13 percent. This figure is low when compared to the number of Western European countries, as this ratio reaches 30% on average, which means that nearly one-third of the population has a savings bank savings. It should be added that housing savings banks have been operating in Western European countries for 70-80 years, while in Hungary it was first possible to conclude a home savings agreement in 1997, at the Good Finance Housing Fund.
In terms of the number of contracts, countries west of us are better off, but Hungary has a 30 percent state subsidy on payments – Western Europe has a 5 percent state subsidy on payments. Domestic LTP market players have expected it would reduce the amount of aid – and, in parallel, the amount of paid-up capital could be increased – so the winding-up hit them as cold showers.
Attractive conditions without state support – can be solved?
It is certain that the disappearance of state aid has created a situation of urgency that will prompt home savings banks to rethink their terms. Without the 30 percent state subsidy, the current yield is low, so it’s not worth your customers to think about saving for a home.
Contracts concluded before the entry into force of the law are, of course, still eligible for support, but financial institutions are long-term thinking and motivated to come up with a structure that can be attractive to clients without the support being withdrawn.