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European Commission concerned about Hungary FX mortgage repayment scheme

At first look, the European Commission has concerns about a plan by Hungary's government to require banks to allow repayment of foreign currency-denominated mortgages at a rate that is more advantageous to borrowers than the market rate, Commission spokesman Amadeu Altafaj Tardio said answering a question at a press conference on Tuesday.

It is still too early to announce a final stand on the plan, Tardio said. While the plan reduces household exposure to the crisis, it could have negative effects on the banking system, he added.

Prime Minister Viktor Orbán told MPs in parliament on Monday that the government supports a proposal to allow Hungarians with foreign currency-denominated mortgages the chance to repay their loans in a single installment at a fixed exchange rate that is well under the market rate.

The Commission is in contact with Hungarian authorities on the planned measures, Tardio said.