Hungarian public supports central bank effort to curb loans

13:05, October 21, 2009      

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Some 89 percent of Hungarians surveyed supported a central bank proposal to require commercial banks to be more circumspect and responsible when lending money, said a GfK Hungaria survey published on Tuesday.

The survey, which the think tank conducted at the National Bank of Hungary's request, came on the heels of protests by the commercial banks, and was published by the local wire service MTI.

The central bank proposal called for capping loans to the public based on their incomes. It recommended a personal-loan cap of 30 percent of income if the loan was in forints, the local currency, 23 percent if in euros and 15 percent if in another currency for monthly household incomes below 250,000 forints (about 1,400 U.S. dollars), 40, 31, and 20 percent for incomes of up to 500,000 (about 2,800 dollars) and 50, 38, and 25 percent if above 500,000.

For home mortgages, it recommended that down payments be at least 30 percent for forint-based mortgages, 46 percent for euro ones, and 65 percent for mortgages in other currencies.

The survey found that about 66 percent of the public felt the specific arguments raised by the central bank were more convincing than those of the commercial banks, and only 13 percent agreed with the commercial banks' position. Twenty-seven percent were unaware of the concrete proposals although most tended to feel that the central bank was more reliable and more likely to be correct than the commercial banks.

The two groups among which support for the central bank proposals was highest were those aged between 18 and 29, and people whose incomes exceeded 250,000 forints.

Borrowing in foreign currencies has become widespread among Hungarians because interest rates have been lower than for forint loans. However, the sharp devaluation of the forint in the early part of this year exploded exchange rates and that came close to doubling installment payments for many borrowers, some of whom had a very hard time meeting them. Many people blamed the commercial banks for encouraging inexperienced borrowers to take unnecessary risks.

Source: Xinhua
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