UPDATE - Troubled mortgage holders to pay Sept installment at fixed rate
Hungarian borrowers with foreign currency-denominated loans who opt to join a state assistance program can already make their September repayments using a fixed exchange rate, National Economy Ministry deputy state secretary Roland Nátrán said at a press conference on Friday.
Hungarians may opt to join the earlier announced assistance program from Friday. Repayments for those who do join will be calculated using a fixed exchange rate for a period of 36 months but no longer than the end of 2014. The rate for Swiss franc-denominated loans ─ once the most popular retail lending product in Hungary ─ is set at HUF 180 to the franc. The rate for euro-denominated loans is set at HUF 250 to the euro, and the rate for yen-based loans is set at HUF 200 to 100 yen.
The balance resulting from the difference between the fixed rate and the market exchange rate will be put on a special, forint account. The interest rate on the special account is pegged to the three-month BUBOR.
Nátrán said the rate at present on the special accounts is 6.09%. Banks may not make a profit on the accounts, nor may they charge additional fees or account extra costs on the loans of participants in the assistance program, he added.
A notary fee for participants will be published in a ministerial decree next week, Nátrán said.
The government will establish within days a committee to monitor the implementation of the assistance program and report back on a regular basis, he said. The monitoring committee will include experts from the government, the National Bank of Hungary, financial market watchdog PSzÁF and civil groups, he added.
Borrowers will have until the end of 2011 to join the program, although the deadline can still be changed in the case of an extreme situation, Nátrán said. Although legislation on the program stipulates that the fixed exchange rate is to be applied to the second repayment after joining the program, the government thought it justified to apply the rate to repayments due in September already, he added.
When the program winds up at the end of 2014, the increase in repayments will be limited to 15%, he said. The government has already agreed on the cap with the Hungarian Banking Association and it could be written into law as soon as next week. Households which are able to make bigger repayments in 2015 may do so, if they choose, he added.
To join the program, borrowers must not be more than 90 days behind on repayments, neither on their foreign currency-denominated mortgage loan nor any loans from other lenders; they must not be participating in any other assistance program; the run of their loan must not end before December 31, 2014; and the value of their home, as estimated in their loan contract, must not be more than HUF 30m, said state secretary for government communications Zoltán Kovacs.
Asked whether early repayment would be allowed under the program, Nátrán said it would, but the foreign currency-denominated principal would have to be paid first, before the amount owed on the special forint account.
A report published on the government's website shows the assistance program, which includes elements other than the fixed exchange rate repayments, will cost the budget HUF 40-45 billion in 2011-2014.
Swiss franc-based loans account for much of Hungarian banks' retail lending portfolio, a cause for concern as the forint has weakened sharply against the Swiss franc since the loan contracts were signed. The forint traded at about 249 to the Swiss franc around noon on Friday, well past its historical low of 273.43 reached overnight on Tuesday.
Stress tests conducted by the National Bank of Hungary last October showed the country's banking system was resilient enough to withstand a strengthening of the Swiss franc to 245 forints at the end of 2011 and to 257 forints at the end of 2012.
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