Template-Type: ReDIF-Article 1.0
Author-Name: Gábor Szigel
Author-Email: szigelg@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Author-Name: Péter Fáykiss
Author-Email: faykissp@mnb.hu
Author-Workplace-Name: Magyar Nemzeti Bank (central bank of Hungary)
Title: The effect of indebtedness on the financial and income position of Hungarian households
Abstract: During the credit boom prior to 2008, a substantial quantity of cash flowed from the banking sector to Hungarian households. With the emergence of the crisis, however, the direction of the cash flow has reversed, due to a net lending related factor and an income-related factor. First, in terms of the net lending, households turned from net borrowers to net repayers. But there is a second, less often analysed, income-related aspect of the process: the volume of interest payable by households has also increased as a result of the strong growth of credit in the pre-crisis years. This was further aggravated by the effect of the depreciation of the forint on FX loans, and, to a lesser extent, by unilateral interest rate increases by banks after 2008. As a consequence, the net interest balance of households deteriorated significantly, reducing both their disposable income and consumption. As a further novel aspect of our analysis, we also carried out an EU-wide comparison of interest burden on households. This has revealed that although the ratio of (bank-related) household credit to GDP is relatively low in Hungary in comparison to other European countries, the related interest-to-GDP ratio is high.
Classification-JEL: G21, F34, E29.
Keywords: credit boom, debt overhang, household indebtedness.
Journal: MNB Bulletin
Pages: 27-42
Volume: 7
Issue: 1
Year: 2012
Month: February
File-URL: http://www.mnb.hu/letoltes/szigel-faykiss-eng.pdf
File-Format: Application/pdf

Handle: RePEc:mnb:bullet:v:7:y:2012:i:1:p:27-42