Fears over Orbán’s scheme for homeowners

Commission to investigate Hungarian mortgage deal.

The European Commission says it has “concerns” about Hungary’s plans to allow homeowners to repay foreign-currency mortgages at levels far below market rates.

Commission officials are examining whether the policy, announced on Monday (12 September) by Viktor Orbán, Hungary’s prime minister, violates EU law relating to the free movement of capital and state aid.

Orbán said he expected between 150,000 and 300,000 people to make use of the plan. He considers it necessary because two-thirds of mortgages in Hungary are denominated in the Swiss franc, whose value has soared dramatically as a result of turmoil in the eurozone.

The scheme, described by the Hungarian Banking Association as a danger to financial stability, would enable Hungarians to repay mortgages in Swiss francs and euros at 20% lower than the current exchange rate.

Austria has criticised the plan, saying that it could harm its own banks, which are among the largest lenders to Hungary.

A Commission spokesman said officials were worried about the “serious negative effects on the Hungarian banking system”.

“The Commission services will have to study whether there are problems regarding European law and treaty compliance,” he added.