A state guarantee on part of the foreign currency-denominated mortgages of Hungarians who opt to avail of a government assistance program will remain in place – albeit cut by 75% – after 2014, details of the program published in English on the website of the National Economy Ministry show.
Under the program, announced by the government and banks on Monday, Hungarian borrowers with foreign currency-denominated loans may opt to make repayments using a fixed exchange rate. The balance resulting from the difference between the fixed rate and the market exchange rate will be put on a special, forint account that will carry a full state guarantee until the end of 2014.
The document published on the ministry's website says "the guarantee applies to 25% of the Special Account as at [sic]1st January 2015". The guarantee fee banks pay – 1.5% until the end of 2014 – will fall proportionally thereafter.
The interest rate on the special account is to be pegged to the three-month BUBOR, according to the document.
Under another point of the assistance program, the government is to introduce an interest rate subsidy scheme for borrowers more than 90 days behind on repayments if they decide to sell their homes and move to cheaper accommodations.
The document on the ministry's website says the budgetary impact of this interest rate subsidy scheme – provided for up to five years and no more than 3.5% – may not exceed HUF 1.5 billion a year.
Yet another element of the program unveiled on Monday involves the establishment of a National Asset Management Company that may purchase the homes of troubled borrowers and allow the original owner to remain as a renter.
The document on the ministry's website notes that households will have to prove their eligibility for this scheme based on number of children, monthly income and other factors. "The budget appropriation of this institution will be strictly constrained," it adds.