By Lefteris Papadimas

ATHENS (Reuters) -The Greek government will soon announce an out-of-court settlement for billions of euros in Swiss franc-denominated mortgages as it seeks to end a long-running dispute over soaring repayment costs caused by currency fluctuations, two sources told Reuters on Tuesday.

More than 50,000 Greeks took out mortgages in Swiss francs in the mid-2000s, attracted by lower interest rates. They are now repaying them in far bigger instalments after the Swiss franc soared against the euro. Many borrowers took the banks to the Greek courts, hoping for relief.

"The proposed settlement will be announced in the coming weeks," said a senior government official with knowledge of the issue.

The plan will be on a voluntary basis. It will provide a favourable conversion of the remaining loans from Swiss francs to euros, with a discount ranging between 10% to 25% on the exchange rate depending on the borrowers' income, a banking source with knowledge of the issue told Reuters.

The government didn't immediately responded to a call seeking comment on the issue.

Currently, out of about 37,000 remaining loans, 20,000 are in the banks while 17,000 are bad loans in the hands of servicers or have been securitised through the so-called Hercules bad loan-reduction scheme, the Finance Ministry said

Their total worth is estimated at about 5 billion euros. 

The government official said the proposed settlement would not affect the Hercules scheme, which aims to help banks reduce their burden of bad loans.

The settlement will amount to tens of million of euros for each bank, depending on how many loans they granted and the borrowers' participation, said the banker without giving more details. He anticipated that the sum would be affordable. 

Borrowers believe the proposed plan will offer insufficient relief, amounting to a few thousand euros to each debtor while they are already burdened with an extra increase of about 70% in their initial loan.

"These are peanuts. The case remains open, we have three collective lawsuits pending in the courts," says Despina Soniadou president of the 'Association of Borrowers in Swiss Franc.'

(Reporting by Lefteris Papadimas; Editing by Edward McAllister and Bernadette Baum)