FX conversion bill prohibits lenders from raising rates

EU

The interest of the foreign currency or FX-denominated mortgage loans to be converted into forint loans cannot exceed the interest of the original loan under a bill on the conversion submitted by the justice minister to parliament today.

The only exception to the rule is if the original interest was below a set minimum rate -- the three-month Budapest interbank offer rate (BUBOR) plus 2% -- by the law.

Banks will have to apply an interest rate that is pegged to the three-month BUBOR.

The interest spread over the BUBOR should be the same as the spread on the original loan, but the spread is limited to a range of 2-5.5% for home mortgages and 2-7.0% for other mortgages.

The conversion law will apply to loans taken out between May 1, 2004 until borrowers' relief legislation came into force in the summer.

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