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Almost 170,000 borrowers participate in early FX mortgage repayment scheme

Financial market regulator PSzÁF on Monday said 169,256 borrowers with foreign currency-denominated mortgages availed of a scheme allowing early repayment at discounted exchange rates.

Participants in the scheme repaid HUF 1,354 billion, calculated using market rates, PSzÁF said. They repaid HUF 984 billion calculated using the discounted exchange rates. Lenders had to cover the HUF 370 billion difference, but they may deduct 30% of this loss from payment of the extraordinary bank levy, putting the net loss closer to HUF 259 billion.

PSzÁF expects, however only six of the ten big bank groups to be a able to make the full deductions, as the bank levy payable by the remaining four groups is less than the 30% of their repayment-related losses.

Nearly all of the repayments -- 96% -- were on loans denominated in Swiss francs. The rest were denominated either in euro or yen.

Credit institutions operating in Hungary as companies limited by shares accounted for about 90% of the repayments. Branches of foreign banks operating in Hungary made up 6%, financial businesses 3% and savings cooperatives for a little under 1%.

The scheme ran for about five months, from the end of September until the end of February.

Borrowers repaid a little more than 24% of the HUF 5,600 billion retail FX mortgage stock outstanding at the end of September 2011 under the scheme, PSzÁF said. Calculated in foreign currency, the preferential-rate repayments affected 23.3% of the stock.

The repayments reduced banks' and saving cooperatives' FX mortgage stock by 24%, that of branches of foreign banks by 21.4% and that of financial businesses by 12.1%.

The repayments affected 25.3% of all Swiss franc-denominated loans, 23.3% of yen-based loans and 2.1% of euro-denominated loans. Most retail euro loans were taken out after 2008, and at exchange rates which did not qualify them for early repayment, the report noted.

Clients financed only about a third of the repayments from forint loans. Still the forint loans granted for the repayments reduced the related decline in the sector's retail lending stock to HUF 1,041 billion.

Of the HUF 312.7 billion of forint loans borrowed for the repayments, one third or HUF 105.9 billion was disbursed in the last month of the scheme. 

Two-thirds of the forint loans came from banks and HUF 78.3 billion or 25% of them from savings cooperatives. 

Savings cooperatives actively used the scheme to acquire new clients, granting almost 42% of the HUF 179 billion of loans that were not provided by the original FX mortgage lender. They were the only segment of the market to raise retail lending stock -- by more than HUF 66 billion net -- and increase market share as a result of the scheme. 

The lending stock of banks operating as independent entities fell by little more than net HUF 1,000 billion, that of foreign bank's branches fell HUF 75 billion and loans held by financial businesses fell by a little less than HUF 25 billion.