In Hungary, legislation abolished a housing policy incentive for more than 20 years of stable savings, abolishing state subsidies for home savings.
The text of the law can be found here. I start with a vision of the future, but anyone who really wants to understand the situation should also read about how it works today.
What will be the future of home savings?
It is difficult to say concretely about the future, just as the drastic content and speed of the change of law have not been believed by professionals. But, for example, there was a signal that Aegon’s home savings had gone off the market on October 1, even though it had invested billions to gain a foothold in the market. What was the reason for the timing?
As far as the future is concerned, the operation of home savings (despite the fact that they are differently regulated in many respects) is similar to that of banks. They collect deposits from which they place loans and profit from the interest margin. Good Finance accounted for 17% of new home loans in 2017, but bank-related home savings preferred to focus on branch network lending. As a result, home savings must continue to compete with banks. For example, Good Finance’s advantage over classical banks is that they do not have a branch network and that it is less costly to maintain a sales network through an agent. They will definitely rely on the established brand and sales channels in the future.
Consider the following strategies to be possible
Provided that the Savings Savings Fund Act is not otherwise modified:
- They will continue their current operations and will be able to market two types of products (I think both are needed at the same time):
- The placing on the market of a product with a low deposit and loan interest rate (similar to the present one) would obviously be free of State aid. This is because people in the current low interest rate environment have been able to get a fixed, legally guaranteed loan in 4-10 years at a favorable interest rate.
- Launch of new products with higher deposit rates. Of course, this is accompanied by a higher borrowing rate. Given the fixed interest rates currently offered and available to other players, there is scope for raising deposit rates even if part of the portfolio needs to be invested in government securities.
- Portfolio Expansion: Existing agent networks / sales channels are valuable, these vendors could notify credit, insurance, health fund, retirement fund, bank account, investment services and many other products, either in-house or from any marketer. These could be the products of new companies set up within a company group, even by a home savings bank, but would be the market place for additional independent intermediaries in each of these product segments, who would broker all competing products in one person. Of course, this would require educating network players and focusing on quantity from quality to quality, but this is no stranger to Western European practice.
- Merger: Anyone who does not wish to continue fighting on this front may sell their portfolio of competition, along with their future liabilities, or stop selling additional savings products.
How Home Savings Work?
Of the 3 market players, Good Finance operates in the same way as a home savings company, so the others place less emphasis on lending within the home savings market, so I present the operation through Good Finance’s figures: