Minister for National Economy Mihály Varga said in Kossuth Radio's morning programme 180 minutes that during consultations with civic advocacy groups and the Hungarian Banking Association it has been recognised that “it seems likely that a solution must be applied which enables the conversion of these loans into forint-based mortgages.”

Mihály Varga added that when the current Government took office there were in excess of 730 thousand debtors with foreign currency mortgages in Hungary, and over the past years the Government provided help to 488 thousand people via the introduction of lump-sum repayment and exchange rate limit schemes, the establishment of the National Asset Management Agency and the launching of various bank customer assistance services. He also stressed that the Government had decided on phasing foreign currency mortgages out of the market, because these are faulty products and relief is needed for people for whom previous schemes have provided no remedy. A solution needs to be found for somehow fixing a "highly volatile interest rate” and an exchange rate that has in the meantime worsened substantially, Mihály Varga said adding that several European schemes can serve as precedents, such as the setting of exchange rates within a given range.

Talking about those affected, he said the solution would benefit most people who have taken out foreign currency loans for home purchases, but not those with home equity loans. “The phasing out of these other loans may occur in some other way,” Mihály Varga said. "We cannot help" people who purchased property for investment reasons, the Minister added.  He explained that at the negotiations the issue of burden-sharing – what level of costs banks are capable of shouldering – was not discussed. He emphasised that at the talks he was representing – besides the State of Hungary – not only debtors but also people without debts and those with only forint loans.

The Minister stressed that “everybody is obliged to repay their debts”, and only those will be provided relief who have found themselves in a difficult position due to faulty contracts or faulty products. Mihály Varga underlined that there is no need to hurry, but a solution must be found and a draft version of possible measures should be completed by autumn at the latest. As the bill on next year’s budget will be submitted to Parliament until 30 September, the fiscal costs of a relief package must be calculated by that time.

Speaking about the repayment of the IMF debt, Mihály Varga said that the amount of repayable liabilities total EUR 2.2bn, and this amount is available; the money can be disbursed from various funds leaving sufficient reserves.
Mihály Varga emphasised that the fact that the Hungarian Government has successfully come to the point that the loan taken out by the previous Government can be repaid while substantial reserves will remain available signals that the path they have taken was the right one. He said that through early repayment the country gains some HUF 5bn as service charges and interest service expenses are spared.

(Ministry for National Economy)