Hungary sets mortgage relief conversion rate for FX loans

GMT 03:47 2014 Monday ,10 November

Arab Today, arab today Hungary sets mortgage relief conversion rate for FX loans

Hungary's banks
Budapest - AFP

Hungary's banks will convert foreign currency debt into forints using the central bank's exchange rate set on November 7, the economy ministry announced late-Sunday, easing fears of a further squeeze on a hard-pressed banking sector.
Analysts had warned that a much lower exchange rate would have wiped out billions of euros worth of banking capital.
The government said the decision -- designed to make expensive foreign currency mortgages easier to pay back for troubled households -- was reached together with Hungary's Banking Association.
It also followed a recent decision by Hungary's Supreme Court that borrowers should also share the risk burden.
Last week the central bank (MNB) said it would offer 9 billion euros ($11.2 billion)  to commercial lenders from its reserves to neutralise the market impact of the conversion.
This would preserve the stability of the financial system and lessen impact on the forint's exchange rate, the MNB said in a statement.
Around a million Hungarians were left with skyrocketing repayments on some 10 billion euros of foreign-currency mortgages taken out before the onset of the financial crisis in 2008 as the national currency slumped.
Those loans were originally cheaper than forint-denominated debt, but as the currency has weakened it has made repaying them more expensive.
Prime Minister Viktor Orban, re-elected in April on a populist platform, has repeatedly tried to shift the loan burden onto the banking sector, which he accuses of enticing consumers with overly attractive loans.
As well as the forex loan conversion, under another new law, lenders will have to refund past fee and interest rate hikes on the loans.


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