If Hungary’s Fidesz party remains in power it will fully phase out foreign currency home mortgages from the market, said Gergely Gulyás, MP of the ruling Fidesz party on Monday.
Hungary’s Constitutional Court ruled today in an interpretation of the fundamental law with respect to foreign currency loans that existing FX loan contracts may be modified by legislative means, but only if such move does not does not prove significantly harmful for either party and even amidst the changed conditions (e.g. exchange rate) the government must strive to maintain balance of interests.
Gulyás welcomed the court’s decision, saying it is a clear mandate for the next government in terms of what it can implement in the next governing cycle. Fidesz aims to phase out every single FX home mortgage from the market, he stressed.
In view of the current court ruling the Curia [the Supreme Court in Hungary] has no reason to wait any longer to decide regarding the one-sided modification of loan contracts and the exchange rate gap. The upcoming Curia decision (likely in May, according to press reports) will give Parliament the opportunity to resolve the FX mortgage situation “relatively rapidly", over a few weeks’ time, because one month after the Curia’s ruling the relevant proposal could already be put up for voting in Parliament, he added.
A solution must be found by which instalments can be fixed, he outlined plans, confirming at the same time that they would regard it unfair if FX mortgage holders found themselves in a more beneficial position than those who had borrowed in forint, Gulyás said. The main rule, he added, is that the banks must bear the damages stemming from the FX loan contracts, but he also reminded that these costs had been borne also by the borrowers and the state. As for the possible ways of burden sharing the early FX mortgage repayment scheme could serve as an example, he said.
At that time this caused HUF 370 bn losses for the banks along with massive HUF weakening. The news flow over the past few months suggested this solution can be ruled out. The financial sector can only hope that what Gulyás said is a mere election promise.As regards the interpretation of the Constitutional Court he said it clearly reveals that the constitution provides an effective protection for the citizens as consumers. In exceptional cases, such as the considerable exchange rate changes unforeseeable for the consumers there is a fundamental change of conditions which gives Parliament an opportunity to modify the contracts - while observing the rightful interests of the parties - by creating laws, thus changing the content of these contracts, Gulyás explained.
He said the measures approved during the current governing cycle, i.e. the exchange rate cap scheme, the establishment of the National Asset Manager and the early FX mortgage repayment scheme, were crucial, for these helped partly resolve the situation inherited in 2010, namely the problem of FX loans that put an unbearable burden on families. So far, the government provided assistance fro 362,000 families, he added.
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