Foreign Currency Loans: What’s the Real Problem
The rise in the exchange rate of the Swiss franc has put many families in a difficult position, including those who, at the time, decided to borrow relatively prudently. However, there are a lot of misconceptions and delays in official communication about foreign currency loans, which I would like to correct in this article.
Yesterday, the government’s likely plans to solve the problems with foreign currency loans came to light. In the government’s view, the root of all problems is the currency-denominated construct, “which is a defective construct that must be rid of.” This, of course, is also due to the “blowout year” because the previous government has narrowed down Fidesz’s so-so-popular and popular government-backed loan and “pushed the masses into flawed foreign currency loan schemes.”
Therefore, the aim is to completely eliminate foreign currency loans, to free people from the impossibility of exchange rate changes and to be a free and prosperous country again. In addition, “as long as there are foreign currency loan agreements, the hands of the National Bank of Hungary are tied to the exchange rate policy, then no normal exchange rate policy can be made” . Understand freely devaluing the forint.
How much of the above is popular and so popular with so many people
Therefore, let us examine what caused the masses’ over-indebtedness and its role in narrowing the availability of publicly supported loans.
The Fidesz version of government-backed loans has been a huge argument for the budget. Because there was no regulation as to who, when, for what purpose, and for what amount, they bought a lot of second-to-third real estate from state-subsidized loans, and even sold their existing home to their relative to get ridiculously low-interest loans.
This put a strain on the state budget in the short term, so it was a sensible move to put limits on who, by whom and for what amount. (If you do not fall for someone, the state will raise the money spent on state support from taxpayers. That is, those who paid off the purchase of the third $ 50 million villa had no subsidized loans.)
Despite the next government’s relatively quick response, the state (understand the mass of taxpayers) has already spent $ 220 billion per year on housing subsidies. (This included the effect of later state subsidies created.) If the subsidized loans were maintained, this amount would have multiplied by 2007-2008.
Out of this HUF 220 billion, it would have been possible to buy 20,000 used homes a year and give it to those in need on a social basis. (Even if the state needs to support access to housing anyway.)
In ten years, there would have been 200,000 state-owned homes, more than enough social housing in a country like this.
Maintaining or even introducing state-subsidized loans was a wrong decision
People chose foreign currency loans mainly because of the high forint interest rates, which are set by the National Bank. From 2001 to 2007, the Governor of the MNB was Zsigmond Járai, Minister of Finance of the first Orbán government. That is, the high forint interest rates under his leadership caused the spread of foreign currency loans. If it were worth looking for a sinner somewhere, maybe the government should start here.
Is it true that the current problem is caused by foreign currency loans due to unexpected exchange rate fluctuations?
The answer is clearly no. This is a very serious problem, but not the main problem.
If the exchange rate fluctuation would have caused a massive write-off of loans, the write-down of forint loans would be negligible compared to foreign currency loans.
Let’s look at the statistics
The non-payment rate on overdrafts is 26%. (This shows loans that have not been repaid or restructured for more than 90 days)
The same loans already have a non-payment rate of almost 29% in HUF terms . Hoppácska! Much more forints in forints than in foreign currency ?! But what if the currency is defective and the foreign currency loan?
What about Home Loans? There the proportion of non-payers is 16.5% for foreign currency loans and only slightly less, 14.8% for market forint loans.
Come on! Comparing the two figures, the same amount of forint loans as foreign currency ?! In proportion, would the same amount of forint debtors expect to be rescued with public money as a foreign currency loan?
Doesn’t it say a word that the existence of foreign currency loans is the root of the problem? But rather unemployment, shrinking economy, high taxation?
The reckless home loans forced by the state? Buy your own home with 10% self-sufficiency and a state guarantee that also gives you 10% self-sufficiency in the form of a state social policy.