A research project on “Residential mortgage lending: social and individual risks – social consequence of the FX mortgage loan crises after 2008 in Hungary” was launched in February 2014, in cooperation between the Metropolitan Research Institute (MRI) and Hungarian Academy of Sciences – Centre for Social Sciences, Institute of Sociology (HAS CSS IS). The lead researchers are Adrienne Csizmady (HAS CSS IS) and József Hegedüs (MRI).
The old system of residential lending in Hungary collapsed at the time of the regime change; a new system was established in the 1990s, and became more sophisticated and gradually reached a wider range of customers in the 2000s. In an effort to boost home ownership, a heavily subsidized Hungarian Forint (HUF) based mortgage scheme was available to home buyers; however, it quickly turned financially unsustainable. Once it was phased out, attractively low but variable interest rate foreign currency (FX) loans became the dominant mortgage product for the consumers. The mortgage/GDP ratio increased rapidly: from 2% in 2000 to 23% in 2008. However, variable FX loans had a higher risk level (exchange rate risk combined with interest rate risk), leading to a lasting debt and affordability crisis in Hungary in the wake of the 2008 Great Financial Crisis. Lending institutions raised adjustable interest rates parallel to the massive devaluation of Hungarian Forint against leading FX currencies (esp. Swiss Francs and Euro), while employment rate and household incomes were plummeting.
The research project of HAS CSS IS and MRI sets out to map the economic, political and social aspects of Hungarian households’ current mass mortgage debt crisis. Our main focus is the interaction between institutional intervention and the behaviour patterns of households under financial pressure. We believe that the explanatory factors behind these phenomena provide valuable insights into some of the fundamental mechanisms of Hungary’s post-transition society.
The project is organised into five Work Packages:
- Residential mortgage lending and macroeconomic changes;
- Debt crisis and the rescue programs (institutional analyses) ;
- Households’ coping strategies (qualitative research on households’ behaviour);
- Vulnerable groups and alternative coping rationales (role of civil movements);
- Mortgage lending risks and social inequalities (quantitative analyses based on representative survey).
Preliminary findings will be presented on a workshop 1-3 of November 2014, in the framework of Metropolitan Research Institute’s three-day conference.