Housing Savings Funds: What to Expect After State Aid Ceases? – Loans

On Tuesday, October 16, 2018, the President of the Republic signed an amendment to the Act on the Withdrawal of State Aid to Household Savings Funds, which entered into force on Wednesday, October 17, 2018. This means that contracts signed on 17 October will no longer be eligible for State aid.

What can we expect now that home savings have lost most of their appeal, and what are our chances of staying at home to save money? We’ve collected the most important information you need to know about what’s happening with home savings plans.

An era has come to an end: the last two decades of home savings

Since January 1, 1997, we have been able to enter into a home savings contract – the Fundamenta Housing Fund launched this year – which has supplemented the state support available so far to help millions of Hungarian citizens achieve their housing goals, be it renovations, home purchases or alleviation of existing home loans. Its unique features are that no interest tax is payable on Good Finance contracts, and that in addition to savings, you can apply for a discounted, fixed-rate home loan.

The opportunity to open a savings account has been made one of the most popular financial schemes for households and condominiums with a 30 percent annual payment after payment , as the subsidy was granted to everyone with a contract. If the contractor made a monthly payment of $ 20,000 for 10 years, that would mean $ 720,000 of state aid per contract. This state support was discontinued by the government on October 16, 2018.

This happened in a few days: this was the end of the state support for the savings banks

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The reason for this was that “this form of savings does not effectively serve the purpose of creating a home while service providers realize extra profit in some state aid” – that was the reason for the legislative proposal available on Parliament’s website. The primary aim would have been to build new homes with the help of the subsidy, but this has not been achieved according to the amending proposal, so the modification is needed.

The 30 percent state aid was indeed high in European terms, which was why it was expected to be cut, but the 100 percent removal of the aid also surprised market players.

As a result of the news, there were long lines in the Good Finance’s branches to open a home savings account until Tuesday evening. There are as yet no exact data on the number of contracts concluded by financial institutions during the two-day dumping period. Pollyanna’s expert estimate and many clients took advantage of the last-minute zerin to reach three to four times the usual monthly volume of last-day contracts.

What do we lose with the elimination of state aid?

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An affordable form of savings that can be launched for many, with a monthly payment of $ 10, made attractive by 30 percent state support. The risk-free rate of return on four-year home savings contracts ranged from 10.28% to 12.54%, which is almost exclusively due to government support. It is no coincidence that approximately 13 percent of the Hungarian population has a home savings account , as there are no other available housing schemes on the market under such favorable conditions.

Another benefit of housing savings funds, in addition to the high expected returns, was that savings could be started for those who did not have a high income; With a monthly payment of $ 50,000, the maximum amount of $ 50,000 in state funding available each year was already available, but if you could only pay a smaller amount, you could.