BUDAPEST: Controversial new plans to make Hungary’s banks bear the burden of surging mortgage repayments could drag down economic growth and may prompt some beleaguered lenders to leave the country, analysts said.
Around a million Hungarians have been left with skyrocketing repayments on foreign-currency loans taken out before the onset of the financial crisis as the national currency has slumped.
Those loans were originally cheaper than forint-denominated debt, but as the currency has weakened it has made repaying them more expensive.
Prime Minister Viktor Orban, re-elected in April on a populist platform, has repeatedly tried to shift the loan burden onto the banking sector, which he accuses of enticing consumers with overly attractive loans.
Under a new law, lenders will have to refund past fee and interest rate hikes on the loans. Another proposal calls for the debt to be converted into forints to make it easier to pay back.
Laszlo Geza Tilk, head of the Currency Debtors Advocacy Association, a group helping borrowers to sue the banks, argues the government’s plans do not go far enough.
“Social justice requires banks to suffer,” he told AFP, arguing that loans should be annulled and turned into forint-based agreements.
But commentators warn the plans could hold back growth in Hungary, which has twice fallen into recession in the past five years as households have struggled to meet soaring loan repayments.
The forint, already one of the worst-performing emerging market currencies this year, has slumped since the plan was announced and earlier this month hit a 30-month-low against the euro. — AFP