Hungary's Orban launches tax exemption for mothers, cap on housing loan rates

Hungarian Prime Minister Viktor Orban announced an income tax exemption for mothers of two or three children and said he would cap interest rates on housing loans at 5% from April as part of moves to shore up the economy ahead of a 2026 national election.

In power since 2010, the veteran leader has struggled to drag Hungary's economy out of an inflation-led downturn, with prices back on the rise at the start of 2025, complicating Orban's re-election bid.

"We are announcing the biggest tax reduction programme in Europe," Orban said on Saturday.

On top of an already-announced doubling of income tax benefits for families in two stages by January, Orban said his government would exempt mothers of two or three children from income tax, starting with mothers of three from October.

The exemption for mothers of two will be phased in gradually from January, Orban said.

"This will be a huge expense, but the reviving economy, the measures to support businesses and full employment combined are capable of paying for this in a way that the budget deficit and public debt both decline," he said.

Orban also said his government was ready to impose caps on surging food prices unless talks with retailers succeed in keeping prices under control, adding he could also limit food retailing profits as a last resort.

Hungarian inflation, which scaled the EU's highest levels two years ago, rebounded to 5.5% in January, above analysts' forecasts, with monthly price growth accelerating to its fastest pace in two years as food, services and fuel prices all climbed.

Orban, a critic of western military aid to neighbouring Ukraine during Russia's nearly three-year-old invasion, also said Ukraine would never become a member of the EU as long as its entry was against Hungary's interests.

"Ukraine's entry would destroy Hungarian farmers, but not just them, the entire Hungarian economy," Orban said.