Govt to limit FX mortgage early repayment scheme

MNB

Borrowers who took out foreign currency-denominated loans at rates above fixed rates in an early repayment scheme proposed by the government will not be allowed to avail of the program, daily Magyar Nemzet and internet portal origo.hu said, citing a decision taken by the government at a cabinet meeting on Wednesday.

Prime Minister Viktor Orbán told MPs in parliament on Monday that the government supports a proposal to allow Hungarians with foreign currency-denominated mortgages the chance to repay their loans in a single installment at a fixed exchange rate that is well under the market rate.

The fixed rate for Swiss franc-based loans -- once the most popular retail lending product in Hungary -- is 180 forints. The rate for euro-denominated loans is 250.

According to origo.hu, the government argues that making the early repayment option available to borrowers who took out their mortgages above the fixed rates would enable them to "profiteer".

The news website noted that the National Bank of Hungary's average monthly Swiss franc rate "has been higher than HUF 180 since January 2009, with the exception of the period from June to September 2009, when it fell short of that level by a few forints."

The value of new CHF-based home loan contracts signed with Hungarian banks fell drastically in the autumn of 2008, when the crisis heightened and the forint weakened. The value of new contracts signed in January 2009 dropped to the equivalent of HUF 12.5 billion from HUF 50 billion-75 billion in earlier months. The value of new contracts signed each month dropped under HUF 1 billion in the spring of 2010 and has been negligible since.

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