By
Robert Hodgson
The
government expects to reach a deal with banks by the end of June over a package
of measures to assist borrowers who face losing their homes after failing to
meet rising repayments on foreign-currency mortgages, prime minister’s
spokesman Péter Szijjártó told reporters last Wednesday.
Following
the conclusion of discussions by representatives from the government and the
banking sector, Economy Minister György Matolcsy has been authorised to negotiate
a complex agreement with banks over foreign-currency loans.
Keeping
people in their homes
A
key goal will be to ensure that not “a single family” caught in the forex loan
trap is evicted, Szijjártó said. He was speaking just two days after the government
announced that a moratorium on foreclosures, due to expire on 15 April, had
been extended to the end of June. Parliament had already voted in mid-March to
extend a moratorium on evictions until the same date, after several extensions
dating back to the previous Socialist-led government.
Hundreds
of thousands of Hungarians took out home and personal loans denominated in
Swiss francs until the financial crisis hit the country in autumn 2008. The
rush was driven by the relatively low rates (even after the banks had slapped
on a hefty margin and often used less-than-favourable exchange rates to
calculate repayments) for loans denominated in Swiss francs compared to those
in the native forint.
A smaller number of loans were denominated in euros,
against which the forint’s depreciation has been considerably less dramatic –
in fact it is almost back to the pre-crisis rate. There were even a few who
took out mortgages in Japanese yen before consumers, banks and politicians
wised up to the risk of exchange-rate fluctuation.
One
in five in mortgage trouble
Just
over one-in-five (21 per cent) of Hungarian mortgage loans with Hungarian banks
(around 192,000 contracts) were in default by the end of last year, according
to the State Financial Supervisory Authority (PSZÁF). Swiss franc loans make up
two-thirds of the total mortgage portfolio. In summer 2007 it cost around HUF
150 to pay off CHF 1 of debt; for months now that figure has been well over HUF
200.
This
means that not only do many house buyers now owe far more than they borrowed
(in forint terms), but many have seen monthly repayments jump by as much as 50
per cent. While the average Hungarian mortgage of HUF 6.15 million (EUR 23,000)
may seem paltry by Western European standards, it is worth remembering that the
average take-home pay in Hungary was around HUF 130,000 a month last year (EUR
486) and unemployment has risen to over 11 per cent.
The
precise form of the rescue package has not yet been revealed.
The
right-wing daily Magyar Hírlap reported this month that a draft plan saw the
government paying the part of instalments above an exchange rate of HUF 190-200
to the Swiss franc. The borrower would repay the resulting debt to the state
later, unless it “melts away” due to a weakening of the “Swissie”.
The report
suggested that priority help would go to those more than 90 days in arrears
whose principal owed is more than 30 to 40 per cent of the mortgaged property.
The help would be offered only in the case of one-property families who live in
the real estate in question.
source: The Budapest Times
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