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Housing loans 2023. Creditworthiness – changes that may facilitate our access to loans, analysis by HRE Investments

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In 2023, there may be several changes that will mess up the housing loan market. According to Bartosz Turk, chief analyst at HRE Investments, the trend of rebuilding creditworthiness started six months ago has “a chance for a spectacular continuation”. His estimates show that in the event of an optimistic scenario, the average creditworthiness may increase by as much as 40-50 percent by December 2023.

Bartosz Turek pointed out that January brought a very serious change regarding the interest rate on housing loans, because its main component, i.e. LIBOR is clearly falling. Three-month (3M) WIBOR is at 6.96%, the lowest since the second half of June 2022.

The analyst pointed out that from the point of view of borrowers, the decrease in interest rates on loans by slightly more than 0.6 percentage points. from the beginning of November may mean a reduction in the monthly loan installment by about 5 percent, but also an analogous increase in creditworthiness.

“And if that wasn’t enough, the market not only stopped thinking about the next ones interest rate increasesbut he began to wonder when cuts would come. If these predictions start to materialize, it will be good news for current and future borrowers. Lower interest rates mean not only lower installments, but also easier access to loans.

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HRE Investments

LIBOR may continue to fall

As we read, interest rate futures, which show what may happen to WIBOR 3M in the coming months, suggest that this ratio may fall to around 5.5-6% in the next 12 months. It would mean that the installments of loans repaid today would fall by another 10 percent. In turn, from the point of view of credit availability, such a change may mean “repairing” the creditworthiness of even more than 10 percent.

Turek pointed out that futures quotations are also important from the point of view of interest rates on loans with a periodically fixed interest rate. “For example, the basis for determining the interest rate on loans with a fixed installment for 5 years should be the IRS in the five-year (5Y) version. The quotations of these contracts have also clearly fallen in recent days. On January 10 in the morning their quotations were below 5.2 percent. This is the lowest since March 2022.

He added that this is important because such IRS quotations should allow banks to offer loans with a fixed interest rate of around 7-8 percent. per year. That’s less than today.

WIRON will replace WIBOR

According to the analysis, however, this is not the end of the changes that may reduce interest rates on loans in 2023. For those who are thinking about taking out a loan, the announcement of the introduction of loans based on WIRON to the banks’ offer is important. It is an indicator that is to replace the currently used WIBOR. The road map published at the end of September last year on the website of the Polish Financial Supervision Authority shows that the entire reform is to be completed in 2025.

Read also: Big changes for borrowers are getting closer. We explain

Bartosz Turek pointed out that on January 9, WIRON 3M was traded at almost 6.23 percent and WIBOR 3M at 6.96 percent. “On this particular day, the difference between these ratios was 0.73 percentage points. And although it may melt in the coming weeks, the data available from April 2019 show that WIRON 3M is almost always listed lower than the corresponding WIBOR, and the average the difference between these ratios has so far been about 0.5 percentage points.” he noted.

This means that if banks start offering loans based on WIRON, the interest rate on such debts may be lower than on loans based on WIBOR, assuming that banks do not decide to increase their margins at the same time. “Again, it is worth adding that a decrease in the interest rate by 0.5 percentage points may mean an installment lower by 3-5 percent and a similar increase in creditworthiness” – the analyst said.

Wages are going to increase

What is happening with salaries is also of great importance for the further development of the creditworthiness of Poles. And these – according to the projection of the National Bank of Poland – are to grow in 2023.

“According to the last projection inflation and GDP prepared by NBP analysts in 2023, salaries in Poland are to increase by almost 12 percent on average. This can translate to over 10%. increase in creditworthiness in the current year alone.

Changes in the creditworthiness test on the horizon

In addition, the Office of the Polish Financial Supervision Authority is working on modifying Recommendation S and partially relaxing the creditworthiness test. The Office is considering changes in calculating the capacity for mortgage loans with a periodically fixed interest rate. For such products, the safety buffer would be – as before – 2.5 percentage points. Changes in the capacity calculation would not apply to mortgage loans with a variable interest rate, based on, for example, WIBOR 3M or WIBOR 6M.

“Let us remind you that this buffer is used to determine the interest rate on the loan, which the potential borrower is to bear in the event of a black scenario. This means that the bank must add 5 percentage points to the current interest rate and check whether the borrower can afford such a loan However, there is a proposal on the table to reduce the currently applied buffer for interest rate increases by half in the case of loans with a fixed interest rate for 5 years, explained the HRE Investments analyst.

Read also: The availability of mortgage loans could be “significantly improved”. We have calculations

“Moreover, in the case of loans with fixed interest rates for longer periods, the buffer may be further reduced. In practice, reducing the buffer by half may mean that the creditworthiness will increase by 15-20 percent.” – added.

New government housing program

This is what the government promises “First apartment” program. In the opinion of Bartosz Turk, rebuilding the creditworthiness of Poles is a prerequisite for the success of this programme.

“As part of it, the government plans to provide people who do not have a flat with an extremely cheap loan (with an interest rate of about 2 percent). However, in order to take advantage of the benefits of this solution, you must first wait for the actual launch of the program (planned for the beginning of the third quarter of 2023) and take debt in the bank, because in order to receive a preferential loan, you will not only need to meet the requirements of the program, but also have creditworthiness” – he noted.

How much can creditworthiness increase?

Turek pointed out that not all the previously mentioned positive changes have to become a reality. “If this succeeds, however, the average creditworthiness may increase by as much as 40-50% by December 2023. It would almost mean rebuilding the creditworthiness before the interest rate increases, although with a higher level of installments. This is still an optimistic scenario,” he emphasised. .

However, it may also turn out – as the analyst added – that “the geopolitical situation or recession may bring negative effects from the point of view of people dreaming of their own four corners”. “From today’s point of view, however, there is no shortage of premises that may speak in favor of improving our situation. In this respect, the beginning of this year brings us more optimism than the beginning of 2022” – noted Bartosz Turek.

Main photo source: Warsaw Grand / Shutterstock

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