Entries RSS Feed Share Send to Facebook Tweet This Accessible version

Favourable ruling expected for forex mortgage debtors

February 14th, 2014

A conservative analyst thinks the weakening of the Forint may annul the favourable impact of the expected decision of the European Court of Justice to empower Hungarian courts to rewrite forex mortgage contracts. He urges serious confidence-building measures to bolster the national currency. 

In Magyar Hírlap, Csaba Szajlai calls the news coming from Luxembourg a “real bomb”, which requires the Hungarian authorities to react in order to pre-empt the foreseeable consequences.

In the official position he submitted to the European Court of Justice, Advocate General Niels Wahl wrote that in case forex debtors were not properly informed about how their monthly instalments were calculated in Forints, the Hungarian courts could rewrite the relevant sections of their contracts and “restore the fair balance between the partners”. The court will rule later this year, but it is widely expected to follow the advice of the Advocate General.

Népszabadság cautions forex debtors against triumphalism, as the expected ruling might eventually reduce their monthly burdens by a maximum of 7 per cent.

However, further rulings may follow on the same grounds, for instance concerning contracts which allowed banks to unilaterally increase interest rates. (See BudaPost, December 18, 2013)

Szajlai notes that Hungarian banks involved in forex lending may now come under market pressure, as they will probably be forced to offer more favourable conditions to huge numbers of debtors. The latter, however may not feel relieved, since the Forint appears over the past month to have suffered a lasting depreciation. “Whether we like it or not”, Szajlai remarks, “the exchange rate of the national currency depends on what investors think of the long term prospects of the Hungarian economy”. In order to encourage them to invest in Forints, Szajlai argues, the government should offer more transparent and predictable market and investment conditions.

Tags: ,