The Economy of Hungary
The Swiss Franc Mortgage Crisis
Many Hungarians borrowed in Swiss francs for cheaper rates, and when the forint fell, repayments soared, prompting government intervention.
A currency mismatch.
Borrowing
In the 2000s, households took mortgages in francs with low interest rates.
2008
The forint fell sharply, so repayments in forint terms rose.
Relief
The government forced banks to convert loans to forints at favourable rates, imposing large losses on banks.
Lesson
Borrowing in a foreign currency is risky if your income is in local currency.
A bigger bill
A household's monthly repayment jumped by a third when the forint weakened.
Ignoring currency risk when borrowing
Match debts to income currency.
Key takeaways
- Households borrowed in francs.
- The forint's fall raised repayments.
- Loans were converted to forints.
- Currency mismatch is risky.
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