A state assistance program for borrowers with foreign currency-denominated mortgages will cost the budget HUF 40-45 billion in 2011-2014, a report by the government shows.
The report was reviewed by the cabinet at a meeting on July 25 and submitted to the European Commission as part of measures the country is taking under its excessive deficit procedure.
It shows the program is to cost the budget HUF 20 billion in 2012.
The program comprises five elements: a fixed exchange rate repayment element, interest subsidies, the establishment of a National Asset Management company to buy the homes of distressed borrowers, a quota system for foreclosures after a moratorium on evictions ends, and the end of the ban on foreign currency-based lending.
The report estimates the cost "related to exchange rate defense" will be at most HUF 5 billion.
Repayments for Hungarians who join the program 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. All of the rates are well under market exchange rates at present.
The balance resulting from the difference between the fixed rate and the market exchange rate will be put on a special, forint account. The money on the special accounts will carry a full state guarantee until the end of 2014 and a 25% guarantee thereafter. Banks will pay a guarantee fee to the state.
Optimally, banks' guarantee fee should cover the cost of any payouts on the guarantee, according to the government report.
The National Asset Management Company will purchase 5,000 homes selected on a social basis at a significantly reduced price for around HUF 20.5 billion until the end of 2014.
The price of building family homes for rent for those who lose their homes will be HUF 15 billion, most of which will stem from the 2012 budget.
A government decree stipulates budgetary impact of the program's interest-rate support at a maximum of HUF 1.5 billion per year, thus HUF 6 billion over four years.
The government estimates that the total budgetary impact of the program will be between HUF 40 billion and HUF 45 billion between 2011 and 2014. Approximately half of this amount is expected to be derived from the 2012 budget.