Gabor Varga, a 28-year-old software developer, has joined almost 100,000 Hungarians who will buy homes this year, lifting the market after it suffered one of the worst collapses in Europe. Hundreds of thousands of families who held Swiss franc mortgages faced soaring monthly payments when the national currency - the forint - plunged after the 2008 financial crisis. Hungary banned foreign-currency home loans in 2010 and record-low interest rates this year are finally luring borrowers back to the market. "I originally wanted to rent, but interest rates are so low, housing prices are down and rents are creeping up, so I thought it was a good time to buy," said Varga, who in March bought a new two-bedroom flat on the outskirts of Budapest with a 13 million forint (HK$414,800) 20-year mortgage. "It makes a big difference that there's no foreign-currency risk." Austrian, German and Italian banks along with OTP Bank, Hungary's largest lender, fuelled a credit boom with low-cost foreign-currency mortgages. The share of foreign-currency loans peaked at 38 per cent of gross domestic product in 2009, according to Raiffeisen Research, bringing a surge in defaults. The government, following an International Monetary Fund bailout in 2008, holds lenders responsible and is pressuring them to pay refunds after raising their taxes. Plummeting mortgage rates this year are drawing borrowers back. The National Bank of Hungary cut the benchmark rate to a record 2.1 per cent in July from 7 per cent two years ago as part of Europe's longest uninterrupted easing cycle. Policymakers pledged to keep the rate unchanged until 2015 to help boost lending and growth. The economy, which suffered two recessions in the past five years, grew 3.9 per cent in the second quarter from a year ago, the fastest pace in eight years. The average rate on new forint mortgages was 7.6 per cent in the second quarter, according to the central bank. Varga said he was paying a fixed annual rate of less than 6 per cent for the next three years. "Forint loans are now really cheap, cheaper than Swiss franc loans were at the height of the foreign-currency mortgage boom," said Zoltan Kovacs, managing director of Budapest-based Benks, which helps retail and corporate clients find loans. "It's starting to look like a functioning mortgage market again." The volume of new mortgages rose to 26.2 billion forint in July, a 27 per cent increase from the previous month and 70 per cent higher than a year ago, according to central bank data. In the first half of this year, mortgage volume increased by 54 per cent from the year-earlier period. OTP forecasts 95,000 property sales this year, up from 88,000 last year and 86,000 the previous year, according to Antal Kovacs, a deputy chief executive at the Budapest-based bank. "We see definitive signs of a turnaround," Kovacs said. "This is still a far cry from the annual 150,000 transactions, which is about the equilibrium point for the Hungarian market." In central and eastern Europe, damage from the surge in foreign-denominated mortgages has been most pronounced in Hungary. Borrowers' repayments more than doubled following the forint's plunge of about 45 per cent against the Swiss franc since 2008. A post-crisis high of 23 per cent of all foreign-currency mortgages were non-performing in the second quarter, according to the central bank. "Hungary has the lowest home prices among EU members in the region," said Gabor Rutai, head of research at Duna House, one of the country's biggest real estate agencies. "The combination of cheap funding opportunities and cheap homes is what's leading the upswing."