Ministry Passes Decision on Conversion of Forex Loans into Forint

Budapest (MTI) – Mortgages denominated in a foreign currency will be converted to forint-based loans at the average exchange rate since the supreme court’s relevant decision or at the central bank’s rate on November 7, 2014, the economy ministry said on Sunday.

Of the two rates the bank will apply the one that is better for the borrower, the ministry said in a statement.

According to the statement sent to MTI, the National Bank of Hungary will ensure the full amount of foreign currency required for the conversion.

The government trusts that once all forex loans have been converted, “banks will use all their energy and available resources to finance players of the Hungarian economy and to further promote the country’s economic growth”, the statement added.

Economy Minister Mihaly Varga told MTI that converting forex loans was crucial for further growth. He said that lending was vital for the economy to stay on a growth course, but lenders needed to get rid of the risks around forex loans.

The minister said that the government had agreed with the Banking Association on details of the conversion, and a relevant bill containing the government’s responsibilities would be tabled to parliament.

The conversion to forints will involve mortgages denominated in euro, Swiss franc and Japanese yen, Varga said, and stressed that “the average forex debtor will certainly benefit” from the move. He added, however, that borrowers would have an opportunity to retain their forex loans, but in that case they would continue to face risks of exchange rate fluctuations.

Varga also announced that parliament would also discuss a bill aimed at fair banking next week, which could “close an irresponsible lending epoch which led to economic and human tragedies, and which was rooted in government policies before 2010.”