• fixing foreign exchange rate for repayments (CHF/HUF at 180, EUR/HUF at 250 and JPY/HUF at 200);
• gradual reinstating of collateral repossessions;
• setting up the National Asset Management Company;
• re-launching EUR-based lending with certain limitations and
• implementing an state interest subsidy scheme (also for a limited circle of debtors).
"A temporary fixing of exchanger rates creates the illusion and a false feeling of security in the debtors that they will free themselves from FX risks," the NBH said in a statement late on Tuesday. The stronger the fixed exchange rate is to the current spot rate, the slower the debts will decrease and the slower Hungary’s financial vulnerability will be remedied, the bank added. In its view, the difference between the fixed and the spot rate accrued on a special account is but an additional HUF-based lending. This "exchanger rate protection" programme may convince even good debtors to sign up for it even though they would not necessarily need it on social grounds, the central bank noted. It added that these debtors may face even larger repayments once the programme is over, unless the forint appreciates substantially. The NBH also warns that the smaller monthly burdens could lead to an increase of consumption financed from credit. There is a danger that some of the debtors will spend their windfall gains on consumption rather than to save up for after the scheme, and so they will not be prepared for monthly repayments potentially higher than what they currently have. This way even the presently good debtors risk becoming defaulting debtors, the NBH warned. Due to such risks the central bank suggests the government to make the fixing available only for the socially needy and those who struggle with difficulties of repayment. Lifting the foreclosure/eviction moratorium for good is "necessary and inevitable", the bank said, adding that the moratorium makes mortgage lending more difficult and more expensive and it undermines debtors’ willingness to repay their debt. The NBH noted that it cannot formulate an opinion on the National Asset Management Company and the interest subsidy scheme, because it lacks the necessary specifics to do so.
While the bank welcomed the introduction of collateral repossession quotas after the moratorium is lifted, it is discontent with the quota itself, saying it should be set to a level that would "help revive lending via portfolio cleansing (at banks) without leading to excessive tensions on the housing market." The foreclosure moratorium is to be lifted as of 1 July but for the first quarter only properties above HUF 30 million in value will be subject where the loan taken out exceeds HUF 20 million. After that, i.e. in Q4 2011, the quota will be 2% on DPD+90 collateral worth less than HUF 30 m. The quota is to be raised to 3% in 2012, 4% in 2013 and 5% in 2014. The NBH finds the quotas set by the cabinet and the Banking Association too low, as these will not allow banks to clean up their portfolios and thus free enough funds to boost lending. It added that the introduction of such low quotas carries similar risks as keeping the moratorium in place would do. In order to avoid such risks the NBH suggests quotas between 5% and 10% and to review these every quarter.
Last Updated on Friday, 30 August 2013 09:11