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MNB estimates 20% of forex borrowers will apply for early repayment

The National Bank of Hungary estimates 20% of Hungarian borrowers with foreign currency-denominated mortgages could apply for a government scheme for early repayment at a fixed exchange rate that is under the market rate, governor András Simor said on Tuesday.

The MNB is prepared to issue to banks from its foreign exchange reserves for the early repayment scheme based on demand, Mr Simor said. The early repayment scheme presents significant stability risk, but the MNB has the tools to dampen this, and it will use these, he added.

The MNB estimates HUF 1,000 billion-1,100 billion of retail forex lending stock will be repaid under the scheme, he said.

MTI calculated that demand for foreign exchange created by the early repayment scheme could reach €3.78 billion, at current exchange rates, or a hair more than 10% of the MNB's €37.6 billion of foreign exchange reserves at the end of August.

After Simor made the announcement about the foreign exchange reserves, the forint firmed from 289.83 to 287.44 against the euro.

The central bank's Monetary Council said in a statement published after a meeting on Tuesday that the early repayment scheme "represents a significant source of uncertainty in terms of Hungary’s risk perceptions".