Although the National Bank doesn`t seem to want to know about the full extent of the problem, there are still many dissatisfied foreign-currency borrowers who are not paying the 25% lower repayment instalments as “promised” by the state. Their burden is often even higher than before – despite all the efforts of the Fidesz government, or maybe because of them.
The repayments must not be higher than the level fixed in January 2015, not even in one single case, as István Binder, the spokesman of the National Bank, explained on public television. Just to be clear, his statement is to be understood as regarding those particularly troubled debtors who were overwhelmed by the constantly increasing sum of their foreign-currency loan long ago.
The government worked out the special construction of the “fixed exchange rates” for this group of people, according to which debt was divided into two parts, allowing the borrower to pay only a fixed amount (the “unspoilt” remaining debt is to be paid after the mercy period of five years is over). This construction is based on the naïve idea that people will earn more as time passes and thus will be able to face their debt hill with a powered-up purse.
Although the state and the banks officially took over a third of the costs from the debtors out of some kind of solidarity, you don’t need to be a maths genius to calculate the consequences: The “saved people” have to pay back a lot more money five years later. Of course we are talking about people with their financial background collapsed, ones who have lost their living due to the crises, about people to whom the banks should never have handed out loans in peacetime in the first place. (This moral guilt arising from the greed of the banks not to miss the business of the century has been admitted by the banking sector due to the pressure exerted by the government in the meantime.)
Serving the small people?
Fidesz wanted to serve everyone’s interests: the borrowers, since they were afraid of losing too many votes; the banks, which the ruling party ripped off without any hesitation by making their life very difficult with the 2011 final repayment scheme; but also the citizens and taxpayers who were careful enough not to get in debt with foreign-currency loans and would not like to foot the bill for the recklessness of others.
Prime Minister Viktor Orbán is still saying regarding the foreign-currency loans that the courts tied the hands of the government – it has done what it could. This is of course a very simple summary of things, which will only be accepted by the most narrow-minded Orbán followers.
Suffice it to point out that the laws, which are referred to by all the court instances currently, are the ones that were recently passed by the Fidesz-KDNP coalition ruling by two-thirds majority, all in service of the “hardworking, small people”. It’s a fact that this balancing act could only succeed in Orbán’s imagination, while the best thing the strategists of the governing party could hope for is that the topic will fade out of the headlines as time passes.
We at The Budapest Times have wondered again and again in the past few years how easily the majority of people has fallen for the latest and latest promises and the stonewalling tactics, which had only one final goal, namely securing the two-thirds majority for another four years. As soon as it was achieved, it was time for the settlement with the banks.
The National Bank is still speaking about an “average” reduction of 25% in the costs of borrowers, even though this topic is a bone that has been nibbled on for too long. It does not matter how the financial experts at the central bank have calculated this average cost reduction, as it works like in the case of stock exchange speculators, who are whispering into everyone’s ears and then the prices suddenly rocket. Then it’s all about the enormous losses – no one will of course advertise how much the speculators won before all that happened.
The same thing is true for the foreign-exchange borrowers, it’s only that they are on the losing side, after the banks made their deal with the state. For someone whose repayments have been increased by the banks to two to three times as high, they will logically not be back in balance with a 25% or even 50% cost “refund”.
Remaining debt is higher than original debt
Let’s see some specific examples that are not really showing the same picture as the government propaganda. Just to ensure that anyone might misunderstand the tone of our article let’s fix this: if someone takes a loan, they must pay it back to the last penny and, as stated before, with compound interest. This is what borrowers intend to do. Then why is it that they are still dissatisfied after all the saving measures by the government?
A family took a loan of HUF 17 million in January 2008 and they have paid back HUF 17,618,000 since then, without falling behind time. After their successful “settlement with the bank” they still owe HUF 18,290,174. Their monthly repayment is HUF 188,330, which is just as high as one year ago. However, the instalment might increase soon, since the interest rate was fixed for a year, but with the conversion of the loan to forints the bank will be able to change the interest rate as soon as a year later.
Other people have been paying their instalments for eight years, all in vain, as their debt of HUF 7.5 million became HUF 7.9 million in the meantime. The Constitutional Court rejected their case, now their only hope is Strasbourg. People don’t understand how it can happen that they have paid off the price of a house over the years, using all their savings and income, and now after the settlement they practically have to start over with the repayments again. The foreign-currency loans have pushed many families into full bankruptcy.
Another foreign-currency borrower can book an additional monthly cost of HUF 25,000, because the government is really helping the families. He expects that more and more suicides will happen and more and more people will be forced to live on the streets.
Another borrower mentions the exchange rate regime, when the forint was bound to the euro rate within a range of +/- 15%. People with foreign-currency loans were fed first, then the forint exchange rate was set free. If a bank warned about the exchange rate risk at the granting of the loan at all, they advised that the forint would never weaken more than 30% from the current rate.
More administrative costs than repayment
There is an argument we hear every now and then, according to which the “loans granted based on foreign currency” never had anything to do with Swiss francs or euros. The banks were able to open and close foreign-currency positions as part of their normal daily business; it did not necessarily have a relationship with credit disbursements. There are examples of borrowers, who are working abroad, and whose euro transfers were first converted into forint and then further to Swiss francs – of course not without commission.
In the case of a credit that was closed in mid-2006, the clients got back almost CHF 560 now, due to “incorrectly” calculated exchange rates. In the case of an early repayment of more than CHF 30,000 (paid in foreign currency!) the bank made a profit of CHF 1260 – the client can see this in black and white in his “settlement” made based on the Fidesz laws, which are supposed to hold the financial institutions accountable.
For one client the monthly repayment was raised from HUF 32,000 to HUF 76,000. Isn’t that usury? Another client escaped into the construction of “fixed exchange rates” because he was not able to pay his monthly instalments any more, which grew from the original HUF 45,000 to HUF 150,000. This meant a “relaxed” monthly rate of HUF 106,000, out of which only one quarter was used to decrease the capital, half of it going to pay the interest and the remaining quarter for paying the administrative costs of the bank – almost EUR 100 for a single loan each month.
As a reminder: most of the loans were disbursed in CHF at rates between 145 and 185 HUF/CHF – based on this fact Fidesz developed the idea of the final repayment, on which the banks lost around HUF 250-300 billion. As the legal conditions for the conversion of the foreign-currency loans into HUF were being tinkered together last year, the exchange rate moved between 240 and 260 HUF/CHF, so the position of the borrowers was around 40% worse compared to the period of the final repayment.
However, interest rates are at the bottom; banks had to give their debtors a little space to breathe. Many debtors will have to cope with double or even triple rates now; the banks are doing their best to accomplish that all the costs burdened on them by the government as special taxes and extra fees will be borne by the customers in the end.
Unfortunately, when we consider the above displayed behaviour of the government and the banks, we do not come to the conclusion that they want to “cure” citizens from living a life in debt. The business of the century called foreign-currency loans cost the inexperienced small people a huge amount of money, which probably can never be estimated precisely. The banks have paid out several billion euros in the conflict with the Fidesz government. Ultimately, the National Bank is booking a profit of EUR 1 billion at least. This is how decision making looks in the Hungarian reality.
Jobbik: “The government must finally put a reasonable plan on the table.”
“According to the statements of László Windisch, the deputy chairman of the National Bank, 77% of the damaged foreign-currency borrowers are paying a lower or stagnant monthly repayment now. In conclusion the other 23%, meaning more than 150,000 clients, are paying more as a consequence of the “settlement”, especially those people who are in a worse situation already and who are in danger of losing the roof from over their heads. Although the government likes to highlight how many hundred billion HUF is given back to the people, it’s easy to find out that the multiple of this amount is staying on the banks’ accounts in an unjustified way. The way to restore full justice would have been to apply the exchange rate valid on the day of taking the loan by the conversion into HUF. This is the reason why Jobbik will try everything in their power to force a more effective action from the government. We urge the government to dissolve the pact with the banks and finally put a sensible plan on the table.”
Dániel Z. Kárpát,
deputy caucus leader of Jobbik