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Hungary gives details of mortgage relief plan

The Hungarian government last month announced details of its long-awaited mortgage relief plan, designed to help households deal with rising repayments on loans denominated in foreign currencies following the depreciation of the forint against the Swiss franc and euro.

Under the proposals (due to come into effect on July 1), homeowners struggling to service foreign-currency mortgages will be able to cap their monthly instalments at a fixed exchange rate well below the current level, with the difference accumulating in a government-guaranteed loan account until 2015. Those unable to pay will have the choice of transferring their mortgages to the government’s newly created National Asset Management Company and remaining in their homes as tenants, or of selling up and receiving a heavily subsidized loan to purchase a smaller property.

The programme also includes the partial lifting of a long-standing ban on foreclosures, introduced by the previous government as a temporary measure in February 2010 and twice extended by the new Fidesz administration. Initially, only the highest-value properties will be eligible for repossession but from October banks will be permitted to foreclose on a specified percentage of impaired mortgages a quarter, starting at 2% and rising to 5% in 2014.

The scheme is welcomed by local bankers, who have complained the foreclosure ban was encouraging affluent households to default on their debts. Gergely Tardos, head of research at market leader OTP Bank, says the banking sector could expect to see a pick-up in asset quality following the introduction of the plan.

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