In the last decade, more than 495 thousand Hungarian citizens raised a mortgage credit of a foreign currency, mostly Swiss franc. The whole amount of the foreign currency loans was 3607 billion Hungarian forint (HUF), ca. $12 billion. The government realized that this was a very dangerous situation: because of the exchange rate risk it was possible that the monthly debt payments (and the whole worth of the credit) of the people who raised a foreign currency loan could grow radically.
The government has found the best solution: they introduced a tax about obligatory converting the foreign currency mortgage credits into HUF with the help of the Hungarian Central Bank. The decision was made in the right time. In January the exchange rate of Swiss franc (CHF) was increasing very quickly. This would have been a huge problem for the Hungarian citizens with a foreign currency loan (and still is a big problem in other central European countries) but thanks to the Hungarian government more than 495 thousand people can sleep quietly.
Some opinions from Hungary and from abroad:
László Szabó (president of Concorde Investment Company): “We often criticize the Hungarian government and the Central Bank but now we have to congratulate them on the perfect timing.”
Bloomberg News Agency: “Hungarian Prime Minister Viktor Orbán, often criticized for punishing banks, is being hailed as a hero for warding off financial disaster with his quest to rid the country of mortgages worth billions of Swiss francs.”
Levente Kovács (president of Hungarian Banking Association): “The rescue of people with a mortgage from the exchange risk was a justified and right decision; the banking sector was closely cooperating with the Central Bank and with the government.”
Timothy Ash (senior economist at Standard Bank, London): “Since 2008 countries of the region have taken numerous steps to reduce exchange rate exposure but Hungary’s conversion program was the most comprehensive. The Hungarians took the move at the right moment.”
– by Lorinc F.