In a bid to reduce burdens of the central budget, the government changed the timing of paying state subsidies to banks. Thus in February, banks financed the state subsidies on home loans in Hungary.

Previously, the state budget transferred the interest payment subsidy to banks in the beginning of every month. In February, the government said from then on it will transfer the interest payment subsidy to banks only at the end of the month. Consequently, the central budget did not pay subsidies in February, and as opposed to the budgeted state expenditure of HUF 17.4 billion, the state paid only HUF 3.2 billion to commercial banks selling state subsidized home loans.

According to sources at banks, the Finance Ministry modified its payment practice due to falling interest rates in Hungary. Thanks to the lower than before loan interest rates, the pre-paid subsidies banks received from the state repeatedly exceeded the amount banks were entitled to in recent months. Thus the state’s generous pre-financing practice did not only subsidize home loans, but also banks, a practice the government decided to stop.