# That’s why you have to pay that much interest on your loan

When you are thinking about borrowing, it is a very important factor when choosing what kind of interest rate loan you choose. Are you better off with a fixed interest rate loan that you can count on over a period of interest? Of course, the longer the term you borrow, the higher the interest you can expect, as the bank will also calculate your potential loss in advance.

If you decide on a floating rate loan, it will not be easy to predict how your installments will change over the term. Banks can only change interest rates following the money and foreign exchange market changes, in accordance with legal requirements and your contract.

## How do banks change interest rates?

So, during an interest period, the interest rate does not change if you fix it, its length is included in your loan agreement. The size of the new interest rate in the new interest period is determined by the change in the interest rate or the change in the interest spread.

There are types of interest rate change indicator for forint loans, which are given different codes, for example H1K3 or DE1K. The indicators differ in that the reference yields (government securities, interest rate swap) on which the calculation is based and the eligible cost of funds are different.

There are types of interest rate changes in forint loans. The indicators differ in that the reference yields underlying the calculation (government securities, foreign exchange swap contracts against forint) and offsetting source costs are different. But let’s look at what these codes cover!

## Changes in interest rates on forint loans:

- H0K: interest rate change index 0 with a fixed value of zero over the life of the loan.
- H1K: Interest rate change index 1. It has 4 variants for interest rates of 3 years (H1K3), 4 years (H1K4), 5 years (H1K5) and 10 years (H1K10). Your interest rate changes as government bond yields change as a percentage, that is, at the government bond reference interest rate set by the Debt Management Center (GCC).
- H2K: Interest rate change index 2, with 4 variants, for the 3-year (H2K3), 4-year (H2K4), 5-year (H2K5) and 10-year (H2K10) interest period. This indicator is influenced by BIRS (Budapest Interest Rate Swap). The three-month BIRS average is an indicator that is independent of the lender’s credit risk or market perception and expresses the price at which the lender can swap its variable-rate source with a fixed rate so that you can keep your interest rate constant over a given interest period.

## Changes in interest rate spread for forint loans:

- H0F: interest rate change index 0 with a fixed zero over the maturity of the loan.
- H1F: interest rate change index # 1 with 3 variants for the 3-year (H1F3), 4-year (H1F4) and 5-year (H1F5) interest periods. The indicator is based on the percentage change in the 3-year and 5-year Hungarian government bond yields between the two interest periods, the ratio of this percentage to the base (ie the government bond reference interest rate published by ÁKK). So your interest rate changes as government securities yields change.

So there are a lot of factors that ultimately determine how much interest you can borrow, and here we have just discussed some of the macroeconomic factors. Use Fu Manchu’s credit calculators to quickly and easily decide the best solution