Hungary Approves New Plan for Distressed Forex Debtors
Hungary's parliament approved on Tuesday a new relief plan for homeowners in distress because of foreign currency loans, its latest effort to ease chronic household debt levels.
The bill tweaks an existing 'exchange rate cap' scheme allowing Hungarians to repay at preferential rates the foreign-currency mortgages they took out en masse before the forint crashed.
Most of the existing conditions for joining the scheme - which caps loan repayments at a fixed rate of 180 forints to the Swiss franc, or 250 forints to the euro - will now be lifted.
About a million Hungarians took out foreign-currency mortgages - most denominated in Swiss francs - at rates of about 150-180 forints per Swiss franc.
Now, there are around 250 to the Swiss franc, leaving hundreds of thousands of distressed borrowers with soaring monthly instalments, and around 10 billion euros ($13.5 billion) owed by Hungarian households to the banks.
Tuesday's measures include the removal of a bar on those with outstanding arrears of more than 90 days entering the scheme, a move analysts say would allow an additional 150,000 borrowers into the facility.
An upper limit on the value of the original loan is also now removed, while borrowers on other assistance program can now apply.
The bill also extends a winter moratorium on evictions to April 30.
Long-running talks between the government, banks' and borrowers' organisations have been deadlocked over how to share the debt burden, with Prime Minister Viktor Orban insisting that the banks should do more.
Last week Economy Minister Mihaly Varga said the cabinet would propose its own solution, after it rejected a proposal by the banks before a November 1 deadline.
An earlier programme entailed estimated losses of around 1.3 billion euros ($1.7 billion) for banks, already reeling after Orban imposed Europe's biggest bank tax in 2010.
On Monday, however, a government spokesman called the latest plan "a temporary solution only".
Analysts say that Tuesday's move eases banks' fears any final package will contain more radical measures such as debt write-offs but still leaves uncertainty.
"It's unclear what further steps the government plans to make", Citibank analyst Eszter Gargyan told news portal Index.hu.
"Many borrowers might wait to see if a more radical plan is coming later," she said.
Source: Agence France Presse
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