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Gov't MPs submit legislation easing conditions for home loan borrowers

MPs of governing Fidesz-KDNP on Monday submitted proposed legislation to Parliament that is intended to ease conditions for retail borrowers with home loans or home leases.

If approved, the legislation would allow retail borrowers to make early repayments on home loans or extend the term of home loans without penalty once every five years. The legislation would allow the penalty-free early repayment only after the second year of the run of the loan. Penalties for early repayment made more than once every five years will be reduced from 2.5% to 1.5% and from 2% to 1% of principle, depending on when the repayment is made.

The legislation would require banks to use a mid-rate - either the National Bank of Hungary's mid-rate or one they calculate themselves - when determining the size of installments on foreign currency-denominated loans, rather than their selling rate for currencies such as Swiss francs and euros.

The legislation would prohibit banks from making unilateral changes to contracts that put borrowers at a disadvantage. In the case of interest rate changes, however, a government decree - to be issued if the central bank or money market rates change - would override the prohibition.

Banks would be allowed to charge borrowers who fall behind on repayments late interest and other penalties for only 90 days. The new rule would not have retroactive effect.

The authors of the package, Fidesz MPs Antal Rogán and Lajos Kósa, also plan to propose an amendment that would require banks to charge a single flat signing fee for loan contracts that would also include 3-6 modifications to the original contract. That bill is to be submitted within a week and a half.

Most of the proposals were included in an eight-point plan announced in September by Rogán and Kósa. Some have been fine-tuned following talks with banks and lobby groups. One proposal, that would have prevented banks from setting the collateral value of a home over the prevailing market value, was not included in the final package. (MTI – Econews)