Josef hírek

2011.09.11. 10:37

Govt party groups propose forex rate cap on mortgage payoffs

Budapest, September 9 (MTI) - Lawmakers of Hungary s governing Fidesz and Christian Democratic parties have proposed to the government that troubled borrowers should be allowed to pay off their mortgages at the exchange rate capped earlier, Fidesz group leader Janos Lazar said on Friday.

Budapest, September 9 (MTI) - Lawmakers of Hungary s governing Fidesz and Christian Democratic parties have proposed to the government that troubled borrowers should be allowed to pay off their mortgages at the exchange rate capped earlier, Fidesz group leader Janos Lazar said on Friday.

The exchange rates of 180 forints to the Swiss franc and 250 forints to the euro should be used if mortgage-holders decide to pay off the entire mortgage in a lump sum, Lazar told a press conference at a meeting of the party groups in Hajduszoboszlo (E).

 

Banks would have to pay all costs of the transactions, Lazar added.

 

The trading of shares in Hungary s largest lender, OTP Bank, was suspended after the announcement on Friday afternoon after losing 10 percent of their value. The Budapest exchange s rules require shares that fluctuate more than 10 percent from their previous close to be suspended for several minutes.

 

The Hungarian Bank Association said the government had not consulted them on the proposal, but their presidential board would examine the proposal and comment later, Janos Muller, a senior official of the association, told MTI.

 

Analysts told MTI that should the government approve the ruling parties proposal, a contraction in the ratio of borrowers with forex loans could improve Hungary s standing in international markets -- but at a serious price, with a weakening of the forint and massive losses for banks.

 

A statement by Equilor said that reducing the proportion of forex loans would remove a major risk factor for the country and improve perceptions of the country abroad while hitting the shares of Hungarian banks. He added, however, that the plan was unlikely to be taken further in its current form.

 

Zsolt Kondrat, chief analyst with MKB Bank, said the greater the number of borrowers repaying their mortgages in full, the bigger the banks losses, while the demand for foreign exchange would further weaken the forint.

 

The National Bank of Hungary reaffirmed its opinion given earlier in the week that it could only conceive of a solution which did not present a danger to the stability and operability of Hungary s financial system.

 

Lazar said the government would make a decision on the matter on Sunday. If this option was adopted, it would be openly applied to contracts already terminated over the past three months, he added.

 

Lazar said that lawmakers at the three-day meeting urged the government to find out who was responsible for "unleashing foreign-currency based loans on the country after 2002".

 

Peter Szijjarto, the prime minister s spokesman said by reducing foreign currency-based loans the country s vulnerability will ease, "giving more freedom for Hungary and Hungarian families".

 

Szijjarto said at the meeting in Hajduszoboszlo that the Fidesz and Christian Democratic groups support the government s economic policy targeted at debt reduction. The government expects a prolonged crisis in the euro zone and plans to make provisions for such an external environment, he said.

 

Hungary faces a 100-billion-forint hole in this year s budget due to lower-than-expected growth. The government must also decide on how to finance 250 billion forints (EUR 906.6m) of VAT repayments to companies, after a European Court ruled the tax had been illegal.

 

Prime Minister Viktor Orban said earlier this week he would reduce public debt to below 73 percent of GDP and raise funds by excise tax hikes on fuel, alcohol, tobacco and gambling, better tax collection and banning public administration purchases.

 

Leader of the main opposition Socialist party, Attila Mesterhazy, slammed the announcement as a "dangerous political bluff". In a statement, Mesterhazy said that for most troubled borrowers the proposal did not present an alternative solution, while people with major savings would not have any problem paying the higher monthly installments anyway.

 

He said the Fidesz plan would cause more problems than it solved, presenting a threat to the stability of the country s financial sector while not actually addressing the problems of the majority of forex borrowers.

 

Radical nationalist party Jobbik said the plan was "disturbing and vague". Jobbik lawmaker Janos Volner said it was as yet unclear what kind of conditions would be attached to the plan, adding that it was doubtful to "what extent the governing parties were on the side of the people as opposed to the banks".

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