The law stipulates that loans will be converted automatically, although borrowers can opt out within 30 days, once they are informed by their lender, MTI news agency reported. It also requires the modified loan contracts to be no less favorable for borrowers than they were prior to the conversion in terms of interest rates, fees and other costs, the news agency added.

According to MTI, as per an agreement between the government and the Hungarian Banking Association reached in August, the legislation locks in rates for the conversion at the National Bank of Hungaryʼs euro and Swiss franc fixings on August 19, although the more favorable rates used earlier for the FX mortgage conversions will still be applied to clientsʼ balances. The difference between the two rates will be shared in equal parts by banks and the state, it added.

The law could impact as many as 200,000 families with loans of HUF 305 bln, while approximately 30,000 of these borrowers also have mortgages.

Swiss franc-based loans were once the most popular retail lending product in Hungary.