In the previous dozen or so years, mortgages with a fixed interest rate did not actually exist on the Polish market. This is not surprising as the market, regulations and customers were unprepared.
Moreover, interest rates in Poland were systematically decreasing: at the beginning of 2000, the reference rate of the National Bank of Poland reached 17%, in 2005 it was only 6%, in 2010 3.75%, and from 2015 until the outbreak of the pandemic it was only 1.5%.
It seemed that the low and declining cost of money was the new norm, so taking a loan with a fixed interest rate could be treated as “taking away the chance for lower instalments in the future”.
Rising rates forced customers to act
However, everything changed in the pandemic, as the NBP reference rate was lowered to 0.1%. and it was difficult to expect that it would be even lower or that it would remain at this level for years. Under these conditions, sales of fixed rate mortgages should shoot out. However, this did not happen, because again the market and customers were not ready for it.
Only four banks had such loans on offer, but most customers did not bother with them anyway (this was partly due to the fact that fixed rate mortgage instalments were slightly higher than those for variable ones). At the end of 2020, there were only PLN 8.4 billion of fixed-rate mortgages in Poland (of which4.6 billion PLN was granted in 2020), which accounted for 2.3 percent. active zloty housing loans .
Due to the requirements of the Polish Financial Supervision Authority, banks have to offer the sale of new mortgages with a fixed rate only from July 2021, or to be precise: with a periodically fixed rate, because most often it is 5 years, sometimes 7, and only one of the banks offers a 10-year mortgage. period without changing the interest rate. In addition, they must also allow for the transition from floating to fixed interest for those customers who have already taken out loans.
Now, however, the situation has started to change and banks report a huge increase in interest in loans with fixed interest rates. “Among the clients who already have a housing loan, we see great interest in switching to a fixed interest rate for 5 years . In February, there were twice as many applications of this type as in January, and in March more than three times more than in February”, says Agnieszka Nachyła, mortgage loan manager at Santander Bank Polska.
The Monetary Policy Council has been raising interest rates every month since October 2021 and these have already gone up by 4.4 percentage points, to 4.5 percent. The increases were particularly strong in March and April, 0.75 percentage points each, respectively. and 1 percentage poin.t
“After the March rate hike, clients reacted en masse and we had a lot of inquiries on this matter on the hotline, in branches or electronic banking. After the MPC decision of 6 April on a surprisingly large rate hike and the announcements of further ones, high interest in the fixed rate remains high among portfolio clients”, indicates the Santander expert.
“In the case of new loan sales, we also see a very large month-to-month increase in interest in fixed-rate mortgages. In the first quarter, the share of these loans in total mortgage sales reached 31%, in March alone almost 40%.” , says Agnieszka Nachyła. Most banks talk about a 5-year period with a fixed interest rate.
“In our country (Poland ed.), the increase in interest in fixed-rate mortgages is very large, in March the sale of such loans was even slightly higher than those with variable interest rates.
Even in November, the share of fixed-rate mortgages in new sales was only 3-4 percent”, says one of the representatives of a leading bank in Poland, who wants to remain anonymous.
He adds that there is also a considerable response from customers who already had a loan and decide to switch to a fixed interest rate. The bank received several thousand. conclusions on this.
Bank Millennium also records a significantly greater interest in mortgages with fixed interest rates . “We have a lot of questions about this type of loan, also from customers who previously took out loans at variable interest rates. We actively inform clients that they have the option to change the loan from a floating interest rate to a permanent one and some of them choose to do so.
The sale of loans with a periodically fixed rate has significantly increased in the bank, we can observe a several-fold increase in interest in this type of loans. The element of uncertainty related to the level of interest rates certainly increases the interest in this type of loans”, says Tomasz Pol, director at Bank Millennium.
Loan instalments become more expensive as interest rates rise
The WIBOR rates, which are the basis for the interest rates on floating-rate mortgages, have been growing strongly since September. The three-month version of this indicator is as high as 5.4 percent, i.e. it has increased by 5.2 percentage points for seven months.
This means that the instalment of a model loan of 300000 PLN and 30 years (with a margin of 2%), at the current 3M WIBOR rate, is approximately 2.100 zloty. In the pandemic, it was just over 1.100. PLN, and before – less than 1.400 zloty.
Unfortunately, the forecasts indicate a possible increase in WIBOR 3M in a few months to around 6.5 percent.
There are now just over 2 million zloty housing loans in Poland and they are worth 420 billion PLN.
On a larger scale, the sale of fixed-rate mortgages has only been going on for a few months (a total of 180,000-200,000 of both types of housing loans may be granted throughout the year), and the scale of conversion of existing contracts to fixed interest rates is still relatively small.
Therefore , the change in the structure of the housing loan market in Poland will probably take years .
It will be a much weaker year for Polish mortgages
2021 was a record year in terms of sales of housing loans in Poland. According to the data of the Credit Information Bureau, 272000 mortgages (25 percent more than the year before) were worth 88.7 billion PLN (which meant an increase by as much as 40 percent). However, this year will be much weaker.
Rising interest rates and regulatory changes result in a decline in creditworthiness, while housing prices remain very high. The number of loan applications will therefore be lower . March was an exception, especially its last days, when customers went to banks to get mortgages in time before the tightening rules came into force in April . The following months, however, do not fill us with optimism.
Certainly this year, the sale of mortgages in the entire market will be lower than in 2021, the question is only about the scale of the decline . “However, it is difficult to estimate it, because there is a lot of uncertainty, for example, it is not known how real estate prices will behave.
Certainly , at the level of interest rates as now, and will continue to grow, a significant group of clients will refrain from transactions , even if they are creditworthy. Some may not accept high instalments. They will only come back when the feet drop significantly” , says Agnieszka Nachyła.
She adds “that some customers will not have the capacity to incur debt. The influence of the government program on the guarantee of own contribution is also unclear, which this year will be of marginal importance for the mortgage market anyway, but changes to the act are pending”, emphasises the Santander expert.
According to Tomasz Pol, this year sales of mortgage loans on the market may drop by 10-20 percent. -”The competition on this market in 2022 is greater, we are set that it will now be one of the most competitive banking market products” , adds the Bank Millennium expert.