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Home loans, installments. Credit Information Bureau data. Expert commentary: Waldemar Rogowski and Adam Czerniak

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This is the highest reading for many years – said Waldemar Rogowski, chief economist of the Credit Information Bureau, referring to the deteriorating loan repayment ratio. In an interview with TVN24 Biznes, he noted that the worrying trend has been visible since May. According to economist Adam Czerniak, the real test for the market will be the end of next year, when the credit holidays will end.

BIK reported that the monthly reading of the Housing Loan Quality Index in October 2022 was 1.13 percent. In the last 12 months (from October 2021 to October 2022), the quality of the portfolio deteriorated, as evidenced by the increase of the Index by (+0.58 percentage points) – we read in the release. It was in October 2021 that the Monetary Policy Council started the cycle interest rate increases. After a year, in the case of some borrowers, the installments even doubled.

– What is worrying is the increase in the rate of deterioration of housing loans from month to month. The situation has been worse since May. More and more loans are falling behind schedule. The reading from October 2022 is the highest since 2015, i.e. for 7 years – noted Waldemar Rogowski in an interview with TVN24 Biznes, explaining that the housing loan quality index shows delays in installment repayment exceeding 90 days.

“Data scares me, but it doesn’t scare me either. This phenomenon must be observed. And I’m more concerned not with the size or value of delays, but with the high dynamics of their growth, noted the chief economist of BIK.

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“We have 61,000 non-performing loans”

Economist Adam Czerniak, analyzing data from the quarterly report on housing loans published by the Polish Bank Association AMRON-SARFiN, indicated in an interview with TVN24 Biznes that “we have 61,000 impaired loans”.

In his opinion, “these numbers are small for the time being, which is mainly thanks to him credit holidaysAs he noted, by the end of 2022, two out of every three installments of mortgage loans in a quarter did not have to be paid – a total of 4 installments were suspended during the first six months of the act being in force.

He added that next year it will be one installment per quarter, so this impact will be smaller. – The real test for the market will be the end of 2023 and the beginning of 2024, because then you will have to pay all three quarterly installments – he reminded.

Waldemar Rogowski admitted in an interview with TVN24 Biznes that he hoped that credit holidays would “hibernate” the quality of PLN loans. However, that didn’t quite happen. This may be due to the fact that, as he estimated, 1.8 million borrowers took advantage of the credit holidays. – According to my forecasts, it would be 70 percent participation, and it is 53 percent – he said.

When asked what is the reason that much fewer people took advantage of credit holidays, he replied that it might be about the availability of information. – Credit holidays are mainly used by younger customers aged 25-34, they constitute 68.3 percent of applicants. They live in larger towns (64.4 percent) and have recently taken out loans. We have a 68.2 percent participation among people who took out a loan in 2020-2021 – he explained.

The availability of new loans for Poles is declining

According to BIK data, in October 2022, compared to October 2021, in terms of numbers, banks and credit unions granted 73.2 percent less housing loans.

According to Adam Czerniak, these data primarily show that the availability of loans for Poles is declining. – It is not that banks do not want to grant loans, but they cannot grant so much of them due to the guidelines of the Polish Financial Supervision Authority – he commented.

In the spring, the Polish Financial Supervision Authority recommended that banks accept a minimum change in the interest rate level of 5 percentage points in the creditworthiness assessment process. Previously, it was 2.5 points.

– That’s the banking business, but to give as much credit as possible. This is how banks make money and if they could, they would grant as much as possible. At the same time, as interest rates rise, such loans become more expensive and fewer people can afford them. The way banks calculate creditworthiness is also changing, because they cannot give loans to everyone. Only those who are confident that they will be able to pay it back, Czerniak said.

– Today the situation is very difficult, because the creditworthiness has decreased by 60, and even in extreme cases by 70 percent – admitted Waldemar Rogowski.

– The decline in demand for housing loans must be reflected in a huge decline in lending. In fact, you can say that the credit action has stopped. There is an ice age on it, to paraphrase the title of a well-known animation – he noted.

Developers ‘Learning Fast’

Waldemar Rogowski noted that the situation on the banking market will affect developers. – They quickly learn from previous crises and respond to the fall in demand with a fall in the supply of new housing. The number of building permits and new investment projects is falling. Currently, it is 28 percent on an annual basis, and in 2023 it is forecast that the number of newly launched residential projects will fall by as much as two-thirds, he pointed out.

– In the future, I think around 2024, interest rates will start to fall because of the fall inflation, the creditworthiness will recover, and the demand for real estate supported by loans will encounter a lack of sufficient real estate supply, which will make it impossible to buy flats. As a consequence, there may be a significant increase in prices, he said.

Read more: “Ticking bombs” under the banking sector. “We would have a serious problem”

Main photo source: Margy Crane / Shutterstock.com

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