Hungary's inflation falls to 1.8% as housing program boosts mortgage lending

The Magyar Nemzeti Bank (MNB) reported that Hungary's annual consumer price inflation slowed to 1.8% in June, a sharp drop from the 3.8% forecast earlier in the year. In response, the central bank cut the base interest rate by 25 basis points to 6% and signaled up to three further quarter‑point reductions this summer.

MNB chief economist Banai Ádám linked the improvement to the Otthon Start housing scheme, which has spurred developers to build more apartments and increased the share of first‑time buyers in Budapest from 25% to 40% within a year. Mortgage lending doubled year‑on‑year between January and April, and the proportion of homes purchased with loans rose from 36% to 62% in the first quarter of 2025. Despite the lower inflation, house‑price growth remains high, with nationwide annual increases of 23.5% and 26% in the capital.

The report also noted that earlier inflation spikes were tied to the 2022‑23 energy crisis and war‑related supply shocks, not solely to pre‑election fiscal stimulus.