(Adds details, comments from minister)
* Economy minister says needs plan on mortgage loan
conversions by autumn
* Says will press ahead alone if banks don't agree deal by
* Thousands of mortgage holders hold debt pegged to Swiss
franc or euro
* Have been hit hard since 2008 crisis by falling value of
By Krisztina Than
BUDAPEST, Aug 1 Hungary will negotiate with
banks on how to convert financially stretched householders'
foreign currency mortgages into forints, but a plan needs to be
in place by autumn, Economy Minister Mihaly Varga said on
Hundreds of thousands of Hungarian borrowers took on
billions of dollars of housing debt pegged to the Swiss franc or
euro, mostly prior to the 2008 economic crisis, and lost out
heavily when the exchange rate shifted against the local
Prime Minister Viktor Orban's government, seeking
re-election next year, has said it wants to ease their burden,
spooking banks, which stand to lose money on any conversion, and
markets at a time when global investors are reviewing whether
they should pull out of riskier emerging markets.
In his most detailed comments yet on the issue, Varga told
MR1 radio the conclusion of talks he held with the Bank
Association and civil groups in past days was that foreign
currency mortgages were a "bad product" and had to be phased out
as quickly as possible.
"We will likely need to apply a solution that converts these
loans into forints in some way," Varga said, speaking of
"somehow fix(ing) the exchange rate level ...and the interest
He neither mentioned a conversion rate nor specified whether
the whole stock of such loans or just ongoing repayments would
be converted into forints - making it close to impossible to
assess the likely impact on the banks.
Last week Orban promised to negotiate with banks over the
new plan, which he said would not be as radical as a 2011
repayment scheme that cost the country's mostly foreign-owned
lenders over a billion euros in losses.
Varga said talks with the banks would continue in coming
weeks but a solution would have to be found by early September,
as the government needed to submit the 2014 draft budget to
parliament by the end of that month.
"We can negotiate ...But by the autumn the latest we need to
have a proposal ready, because if there is no such proposal then
the government will make decisions on its own."
Varga said the government primarily wanted to help families
who took out foreign currency mortgages to buy a home, and not
those with equity-type free-use mortgages.
That means the measure could affect around 226,000 loan
contracts or 1.824 trillion forints ($8.07 billion) worth of
loans, according to June central bank data.
Varga signalled the government's fiscal room for manoeuvre
"I have to represent the state, including those people who
did not take out any loans or took out loans in forints ... and
are now looking at what kind of relief schemes the state
participates using with taxpayers' money," Varga said.
Big foreign banks whose Hungarian units may be hit by the
mortgage relief scheme include Austria's Raiffeisen
and Erste, Germany's Bayerische Landesbank
and Italy's Intesa Sanpaolo.
($1 = 225.8915 Hungarian forints)
(Reporting by Krisztina Than; Editing by John Stonestreet)