Foreign Currency Retail Loans Converted to Forint in Hungary
- New Europe Investor
- August 27, 2015
Hungary’s Economic Minister, Mihaly Varga has announced the government’s plan to convert the country’s foreign currency retail loans back to the local Hungarian forint.
With the forint currently at a 4 month high to the Swiss franc, nearly $1 billion worth of consumer loans were brought back to the local currency at the market rate on the 19th August.
Customers will get some rebates to compensate them for the loss from the conversion. They will also be in receipt of some tax relief in 2016 and 2017.
Crucially, the conversion is voluntary to customers who can continue to keep their loans at the mercy of the currency market, and not avail of any of the government support. Interest rates on any converted loans will be held at a fixed rate.
Varga said that the proportion of foreign currency retail loans will only be 3% following the action. It was 54% prior to the conversions.
Last year, Hungary forced all Swiss franc loans back into the forint, in a move that proved to be a stroke of luck for mortgage holders in the country.
At the beginning of 2015, Switzerland removed the peg on their currency seeing its value increase by over 20% in one day. It has left headaches for governments in Romania, Croatia and especially Poland, where around half of mortgages are currently denominated in Swiss francs.