Fidesz did not consult the associaton before announcing the proposals, which would be detrimental to the operations of Hungary’s banking sector, and would overturn the foundations of civil-code based contracts existing between banks and clients if enacted in their present form, Mr Erdei said, urging the start of consultations without delay.
The proposals fail to take into account the rules fixed by a recently adopted code of conduct which significantly limited banks’ room to amend contracts unilaterally, Mr Erdei said, noting that the package if adopted would undermine the domestic mortgage system on the whole.
Among the proposals, the one providing borrowers with an automatic extension of the maturity of their loans by up to five years would paradoxically furnish them with the same right to unilaterally modify contracts that the proposals aim to eliminate for banks, the Hungarian Bank Association chief noted. Such a rule would also serve to increase the number of borrowers not making repayments on their loans.
Mr Erdei said the Hungarian Bank Association, Fidesz MPs and the government should urgently start consultations on the package. The bank-association chairman said the bank association will establish its final position on the proposals only after it studied the detailed proposals in writing.
The proposals, announced at a meeting of the governing Fidesz-KDNP’s parliamentary group on Thursday, include prohibiting banks from making unilateral changes to contracts which disadvantage clients, banning unjustified interest-rate hikes, making the use of a currency mid-rate compulsory when computing instalments and making it obligatory for banks to offer clients the option of free early repayments. Under a further proposal, banks should automatically grant at the request of the client an extension of the expiry of loans by five years. Banks would also be prohibited from establishing a home loan’s value over the prevailing market value of the collateral, and would not be allowed to charge penalty interest-rates or any extra fines in the case of default.
The planned measures will not apply either to properties purchased for business purposes or second or third homes.