I had a very nice friend talking about foreign currency lending yesterday. He asked me, “What did we know it would be?” While I told her a lot of comments on the subject, I realized that very few people knew this information. I say that people have learned nothing from the past and will soon be repeating the social financial disaster! Lessons from FX lending…
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How did foreign currency lending look in practice?
Believe that the process of foreign currency lending has not been clearly black and white. Today, many people have believed that evil banks have misled their customers with a deliberate intention. The truth is, nobody knew. In the currency risk footnote, everyone expected that the $ 50,000 loan would go up to $ 65,000 at worst. But it was with him that it was a risky undertaking…
As at 31 December 2008, housing loans amounted to HUF 3,875 billion , which is more than 14 per cent of GDP, of which 61 per cent came from AB-based home loans. The number and amount of foreign currency loans introduced by the banks in 2004 also increased significantly: in 2004, they did not reach one tenth of the total amount of loans, and in 2008 exceeded 60% . Compared to the end of 2007, the total amount of loans increased by nearly 25 percent and that of AB-based assets by 62 percent.
By 2008, almost everybody took out foreign currency loans
What do you think happened in the rare case that the credit intermediary told the client to pay HUF 80,000 per month instead of HUF 50,000 per month because the currency has serious risks? All this at a time when you were happy and unhappy with the crowd and even from the tap?
I’ll tell you the solution! The client listened to the one-and-a-half hour professional lecture (half of which he did not understand), thanked him, stood up and went to another bank / intermediary who confirmed that there would be no trouble. Anyone who wanted to buy foreign currency decided in advance that this was the solution for him. In the bank, he sought the confirmation of his decision.
Forint-based loans were basically made up of two kinds of people: who was a speaker and / or had more than average money
Although the second option is highly questionable, there could be countless people who belonged to the upper middle class at that time, but chose foreign currency lending. Of course, it is a very strong statement that somebody would have been a “hit”, but we really scratch the reality. Very few people made a conscious, rational and professional decision that would have resulted in a forint-based loan. It was more typical that the forint-based creditor of that period was simply afraid of exchange rate risk. He considered it risky.
My goal is not hurt anyone. But I would like to talk honestly about the characteristics of the market at that time. Of course, everybody postpones himself as a nuclear physicist, but at that time it was not necessarily a visionary prediction. Rather, they chose the forint loan as the foreign currency loan. This is a huge difference.
For a long time, foreign currency lenders were better off – the lessons of foreign currency lending
Very few have noticed on the go that they were much better off even with increased repayment than those who had taken out a forint-based loan. After 2008, everyone felt that the former “dream foreign currency loan repayment” had begun to rise.
Nobody dealt with the forint lenders, no one talked about the loss of the forint-denominated “foreign currency loan”, which has been ticking for years. Why? Because then, he would have realized that everyone was still better off on a forint basis.
And what would have been the logical conclusion? The fact that one has typically overtaken themselves. The majority would not have been able to achieve its goal with more expensive forint-based loans, as there would have been no money to repay.
Foreign currency lending was based on a social consensus, in which everyone was involved (state, debtor, bank, intermediary, real estate). The point was to move to a bigger apartment (they could buy better cars) who wouldn’t have had the money.