Serious help for foreign currency debtors

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“The legislation introduced to improve the situation of foreign currency debtors is helping the holders of foreign currency loans in accordance with the Government’s earlier promises”, Minister of Justice László Trócsányi said at a press conference held jointly with Minster for National Economy Mihály Varga.Mr. Trócsányi told the press that in view of the fact that the legislator is intervening into private contracts, it had to act with extreme care and while taking into account the principle of necessity and proportionality.

He also noted that bank customers have been left with a wide range of choices: those who receive their salaries in foreign currency, who conform to the Hungarian National Bank’s strict conditions, whose contracts are due to expire before December 2020 or who are Yen or VIP debtors may chose to retain their foreign currency loans and opt out of forint conversion. “The Government is keeping to its promises; instalment payments will be reduced by 25-30 percent”, he declared.

With relation to the bill on the conversion of foreign currency loans to Hungarian forints, the Minister said that the Government had to take into account the starting interest spread applied when the loan was taken on and basically re-calculated to enable the interest spread to return to its original level. However, minimum and maximum interest spreads were also determined, the latter being 4.5 percent for home purchase loans and 6.5 percent in the case of general purpose loans. According to the Government’s standpoint, this will also lead to an improvement in the position of foreign currency debtors, Minister Trócsányi emphasised.

At the press conference, Minister for National Economy Mihály Varga said that the Government is continuing to follow the basic principle according to which the roughly 650 thousand people with forint-based mortgages must not find themselves in a worse situation than the foreign currency debtors whom the administration is currently assisting. The Government has agreed to use the average exchange rate during the period between the deadline of the Supreme Court (Curia) legal uniformity decision (6 June) and 7 November as the basis for settling accounts.

The Curia’s legal uniformity decision also stated that exchange rate risks must be borne by bank customers, and this has restricted the Government’s scope of action, Mr. Varga added. The Minister for National Economy explained that calculations with relation to the average exchange rate have been completed and included in the agreement signed with the Hungarian Banking Association. The daily rate for 7 November was also included among applicable exchange rates, because the Swiss Franc and Euro exchange rates have separated and the two currencies have increased and/or decreased in value in different ways, meaning that euro debtors would have been worse off with the calculation of an average rate, Mr. Varga continued.

The Government is expecting the vast majority of the remaining 400 thousand foreign currency debtors to choose to have their mortgages converted into Hungarian forints, thus freeing themselves from exchange rate risks, he stressed.

In reply to a question regarding why people whose foreign currency loans are due to expire before 2020 can choose to keep their current loan construction, László Trócsányi said that based on the principle of necessity and proportionality, the Government felt that these, otherwise very few, debtors should be given a choice. This is also the right decision from the perspective of constitutionality, he added. The Minister also stated that the minimum interest spread had been reduced to 1 percent from the original 2 percent because interest rates had been falling continuously during the past three years.