The first thought that came to my mind on reading Edward's post is that shareholders in Swiss lending institutions that are issuing loans to Hungarians at this point should be phoning the boards of directors and asking what is going on. It’s hard to believe that anyone can sell a story that Hungarian homes are going to keep increasing in value, or that loaning against home equity to borrowers who might soon be jobless and are on the ropes financially now anyway is a good idea.
I think that the Hungarian central bank ought to go ahead and ease monetary policy significantly now, since homeowning borrowers who are most likely to default will wind up defaulting regardless; and the benefits of easing to internal economic conditions might offset the damage due to a weakened forint. Of course, this isn’t likely to happen. It would be easier for the central bank to do nothing until truly forced to by events and thus the bank would have an excuse.