Challenges of a Resurrecting Loan Market


As central banks are easing newly introduced quantitative tightening policies around the world, the Hungarian Central Bank decided that interest rate cuts could be implemented as well. As the government aimed to return to the previously utilized high pressure economy, many new state-subsidized loan products were introduced parallel with the rate cuts. After months of continuous and consistent rate cuts with the help of the subsidized loans, the Hungarian Loan Market started to show revitalizing signs in forms of dynamically increasing volumes of disbursed loans.

Balancing between the sales-oriented growth and the risk-aversion mindset, the Hungarian Financial Institutions were reacting almost universally the same to the new challenges of the current environment:

  • enforcing stricter debt-to-income and loan-to-value measures in the case of housing mortgages. In the presence of a looming recession it is necessary to be more on the safer side and don’t allow debtors to become overburdened with financial liabilities.
  • leaning more on state-subsidized loans for SMEs and households that would be used a cross-selling opportunity without having to take unnecessary risk. The Hungarian Loan Market was fueled by state-subsidized loans in the forms of pre-natal personal loans, subsidized mortgages for families and growth-oriented revolving credit lines for small and medium enterprises - these lending products became much more sought-after in the times of higher interest rates and with state-back guarantees, Financial Institutions were utilizing more and more these products.
  • turning away from riskier customer segments: and carrying out more thorough screening and KYC procedures while making sure that the screening procedures are not overtly risk-averse.

The market conditions and the volume of customer demand posed great challenges that needed to be taken care of. Being one of the top IT consulting firms, Advocate Business Consulting’s experts were already working with several Financial Institutions and were able to help our clients in a wide range of related projects:

  • fine tuning risk assessing and monitoring processes;
  • renew and redesign previously used loan origination processes and develop new online applications for quick loan application and integrate it into already available electronic channels;
  • utilizing newly introduced available tools for quick decision making: statistics-based housing value appraisal for real estate mortgages, online debtor authorization.

Advocate experts were contributing to these projects in many different roles, starting from requirements analysis, to custom application development through project management - a range of roles and expertise that is highly regarded in the Hungarian Financial Institutions sector. All of our projects ended successfully, with full satisfaction from our clients' end with the end results that helped to both manage risks and grow sales volumes in a resurrecting loan market.