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Housing loans. ING Bank Śląski was the first to introduce loans based on WIBOR, other banks are working on a new offer

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ING Bank Śląski was the first bank in Poland to introduce mortgage loans based on the new reference index WIRON to its offer. The loan interest rate will be updated monthly. Work on the implementation of the new mortgage offer is also underway at mBank, Bank BNP Paribas and Bank Millennium.

In recent months, Bank Millennium, ING Bank Śląski and Bank BNP Paribas decided to suspend offering mortgage loans with a variable interest rate based on WIBOR. The reason is the preparations for the reform of reference ratios, according to which WIBOR will be replaced by the WIRON (Warsaw Interest Rate Overnight) index. Mortgage loans with a periodically fixed interest rate remained in the offers of these banks.

On Monday, ING Bank Śląski resumed offering mortgage loans with variable interest rates. There would be nothing extraordinary about it, if not for the fact that the interest rate on such loans is already based on the new reference index WIRON 1M Compound Rate. It is the first bank in Poland to offer such a solution. The bank’s margin is also included in the interest rate on the loan.

Mortgages based on WIRON

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ING Bank Śląski explained earlier that “due to the construction of a variable interest rate based on the WIRON 1M Folding Rate, the customer’s repayment schedule will change every month and take into account the changing amount of the ratio. This translates into a different installment amount each month”. This means that the installment may increase or decrease – depending on the change in the WIRON index.

Currently, the WIRON 1M Compound Rate is 5.91559 percent. For comparison, WIBOR 1M is at the level of 6.86 percent, and, for example, WIBOR 3M (three months) is 6.90 percent.

Mortgage loans with a variable interest rate based on the WIRON index “in the coming months” are also to appear in Bank BNP Paribas. “We are working on providing customers with an offer of mortgage loans as well as company products based on the WIRON index. We plan to implement it in the coming months” – told TVN24 Biznes the press office of Bank BNP Paribas.

Importantly, the bank’s offer will no longer include mortgage loans with interest rates based on WIBOR. “Mortgage loans based on the WIBOR index will not return to our offer. We will return to the offer with a variable interest rate with a new offer based on the WIRON index” – emphasized representatives of Bank BNP Paribas.

Work on resuming offering mortgage loans with a variable interest rate is also underway at Bank Millennium. “From March 1, 2023, Bank Millennium suspended offering mortgage loans with a variable interest rate throughout the loan period. The bank’s offer includes mortgage loans with a periodically fixed interest rate for the first 5 years. The bank is working on implementing a new mortgage loan offer and other products based on reference index WIRON, in accordance with the schedule of the Road Map” – informed Bank Millennium in a reply sent to TVN24 Biznes. “We will keep you informed about the start of offering these products” – added.

mBank has not yet provided details on the introduction of WIRON-based loans. “The work is in progress” – we read in the reply sent to us.

According to the road map published at the end of September on the website of the Polish Financial Supervision Authority, the withdrawal of products and instruments using WIBOR is to take place in 2024. The entire reform is to be completed in 2025.

Conversion of WIBOR to WIRON

The National Bank of Poland in the “Financial Stability Report” published in recent weeks informed that the conversion of WIBOR to WIRON may pose a problem not in the case of new loan agreements, but in the case of existing ones. The central bank indicated the need to convert the interest rate in such a way that none of the parties would be privileged.

For now, it is not known how the conversion of the interest rate will look like in detail.

“The Bank will act in accordance with the tasks and deadlines set by the National Working Group for the entire market. The rules for changing loans from WIBOR to WIRON are to be specified in the Regulation, which we are still waiting for,” the press office of Bank BNP Paribas reported.

Main photo source: Photocon/Shutterstock

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