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Foreign currency loans

Following a large fall in the Hungarian currency, many Hungarian households faced significant problems keeping up with loan repayments for debts that were denominated in foreign currencies. In 2010, over 90% of debt was denominated in Swiss francs and approximately 7% in euros. Foreign currency loans were marketed to consumers at lower interest rates than loans in the local currency and, as in other countries, consumers were not properly informed of the risks if the exchange rate between the Forint and the Swiss franc would start to fluctuate wildly.

However, consumer exposure to a sharp appreciation of the Swiss franc was prevented by timely action from the Hungarian government. The Hungarian government gradually phased out the foreign currency loans and, in doing so, prevented a massive crisis. First, in 2011 and 2012, foreign currency borrowers were allowed to settle their loans at a predetermined interest rate: some 170,000 loan holders repaid their debts with the help of this program. Second, in 2014, the Hungarian Parliament adopted a law requiring banks to reimburse borrowers for fees and surcharges levied during the lending period which were deemed to be unfair.

Later the same year, the Hungarian Parliament adopted a law that obliged all banks to convert foreign-currency mortgage loans into Hungarian currency. As a result of all these measures, by the beginning of 2016, the total stock of foreign currency loans had fallen to only 1%.