The Hungarian banking system was characterised by ample liquidity and a strong capital position in H1 2025. However, overvaluation in the housing market poses increasing risks, according to the biannual Financial Stability report of the National Bank (MNB) released on November 25.

The capital adequacy ratio of Hungarian lenders was 20.7% at the end of June, equivalent to more than HUF2.3 trillion (€6bn) in free capital buffer, while liquidity reserves exceeded HUF 21 trillion, translating to a liquidity coverage ratio of 168%, significantly above the regulatory minimum, MNB managing director Adam Banai said, presenting the report.

Banks reported HUF643bn in net profit in H1, down from HUF724bn a year ago, excluding volatile and one-off items. Consolidated profit, which includes the results of domestic and foreign subsidiaries, rose 17% to HUF850bn.

State interest subsidies, up 4.5% to HUF562bn in the first half, continue to play an important role in the robust profitability of banks and now exceed interest revenue received from the central bank.

The sector’s ROE was around 18% in Q3.

Stress tests showed that lenders are resilient to various liquidity and solvency shocks. Compared with the 2008 financial crisis, the banking sector is in a significantly stronger position, credit risks remain moderate, and the ratio of non-performing loans stayed at a historically low level.

In the report, the MNB emphasised that housing-market overvaluation has become a major risk, noting an 18.8% overvaluation of home prices.

Lending activity showed a dual pattern, with corporate lending up 2% y/y in H1, with no sign of a turnaround. The pace of growth ranks Hungary in the mid-range, slightly exceeding the EU average growth of 1.9%, but well below the regional average of 8.2%, in countries such as the Czech Republic, Poland, Romania and Slovakia.

On the other hand, household lending remained robust, with an 11.7% annual increase and the disbursements of home loans expanded by 15% in H1. The latter was before the government launched its new housing loan programme Home Start, offering a fixed 3% rate to borrowers. By the end of October, 5900 contracts worth HUF203bn had been signed, with an average loan size of HUF34mn.

The central bank expects the new lending programme to boost mortgage lending by an additional HUF1 trillion to Ft 1.9 trillion by the end of 2026, a historic high.

However, the MNB warned that without a marked increase in housing supply, the heightened demand could lead to an additional 15 percentage-point rise in house prices by late 2026, Banai said.

Nominal house prices rose by 23.9% year-on-year in Q3 and are on track for their biggest annual gain in a quarter of a century.