BUDAPEST: Hungarian foreign-currency mortgage holders may not lose money by converting their loans back into forints at a fixed rate next year as the domestic currency could weaken further by then, Economy Minister Mihaly Varga said.
Banks will have to convert billions of euros worth of the loans in the first half of 2015 at 309 forints per euro.
The central bank sold nearly 8 billion euros to banks last week to help them with the conversion and avoid a hit to the forint.
"I suppose that when the actual conversion into forint happens this will be a more favourable exchange rate," Varga told the commercial television ATV late on Sunday. "That is, the exchange rate will probably not stand at the current level next year."
The forint traded at 305.80 against the euro at 0918 GMT on Monday. Hundreds of thousands of Hungarian households took out foreign currency loans, mainly in Swiss francs, in the years before the 2008 global crisis, because the interest rate on them was much lower than on forint loans.
But the slump in the forint following the crisis ramped up their repayment costs, and a surge in unemployment also contributed to a sharp rise in loan defaults and a tumble in domestic demand. Viktor Orban's conservative government, in power since 2010, decided to convert the loans into forints after earlier schemes to help foreign currency borrowers failed to end the problem.
Analysts have said the government needed a relatively strong forint at the end of the year to keep its debt, which is partly in foreign currencies, declining. Converting the foreign currency loans would remove one argument for keeping the forint strong next year.
Comments
Comments are closed.