The supreme court of Hungary has ruled that banks were within their rights to sell foreign-currency mortgages to its customers. It’s a victory of sorts for the financial institutions who came up with the loans as a way to make it affordable for Hungarian consumers to purchase their own homes. The problem came when the volatile forint collapsed during the financial crisis, exposing the country’s weak fiscal position. Overnight, almost, borrowers saw their monthly installment payments skyrocket to unaffordable heights.
The court found that consumers had not been provided with enough information about the possibility that the forint could fluctuate over the period of the mortgage loan and the risks this entailed. It also found it unfair of the banks to use one exchange rate to disburse the loan, and another for repayments. Hungarians owed HUF 3.4 trillion in foreign-denominated loans as of the end of March. The Hungarian government pledged to find a solution for the forex loan crisis and it’s thought the court’s findings will set the framework for a future deal with the banks.
