Mortgage loans with a periodically fixed interest rate have been very popular in recent months. – This is a debt that provides a little more security and stability than a loan with a variable interest rate – indicated Bartosz Turek, chief analyst at HRE Investments. At the same time, he pointed out that “when interest rates start to fall, it may turn out that borrowers will have to pay extra for this additional security.”
In recent months, people who want to buy a flat have been increasingly willing to take out mortgage loans with periodically fixed interest rates. In the largest bank in Poland – PKO BP – they accounted for the majority in the fourth quarter of 2022. – The interest in the offer with a periodically fixed interest rate remains at a high level. In recent months, the share of loans with a periodically fixed interest rate in newly concluded housing loan agreements exceeds agreements with a variable interest rate – also Paweł Jurek, spokesman for Bank Pekao, told TVN24 Biznes.
When deciding to choose a mortgage with a periodic fixed interest rate for several years, usually five, we have the same amount of loan installments, so we avoid fluctuations resulting from changes in the amount NBP interest ratesand above all WIBOR rates.
Mortgage loans with a periodically fixed interest rate
Bank Pekao recorded the largest increase in interest in housing loans with a periodically fixed rate in the first two quarters of 2022. It was similar in mBank.
– Observing the market, it can be argued that the increased interest in periodically fixed interest rates was correlated with subsequent decisions of the Monetary Policy Council to raise interest rates – explains Agata Pankiewicz, Mortgage Banking Manager at Alior Bank. Ewa Krawczyk from Santander is of the same opinion. However, as he adds, already in earlier years, for example in 2020, the bank observed a noticeable interest of customers in such loans.
The Monetary Policy Council started the cycle of NBP interest rate increases in October 2021. As a result, during the year the main reference interest rate increased from 0.1 percent to 0.1 percent. up to 6.75 percent In October 2022 – and later also in the following months – the Council decided to keep the NBP interest rates unchanged.
According to Krawczyk, 63 percent. of all housing loans granted so far in 2023 in Santander Bank Polska were loans with a periodically fixed interest rate. In the whole of 2022, it was 54 percent. In PKO BP in 2022, loans with a fixed interest rate accounted for over 60 percent. In turn, in Bank Pekao in 2022, on average, every third loan agreement was signed with a periodically fixed interest rate.
“They will be more and more popular”
According to Bartosz Turk, chief analyst at HRE Investments, “in 2023, loans with a periodically fixed interest rate will be more and more popular for at least two reasons.” – Some banks have given up granting loans with variable interest rates, so it is hardly surprising that the popularity of these loans has decreased – noted Turek.
Bank Millennium, ING Bank Śląski and Bank BNP Paribas have decided to suspend offering mortgage loans with variable interest rates in recent weeks. 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. 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.
– But that’s not all. After all, the government program (Pierwsze Mieszkanie – ed.), which, as announced, is to be launched at the beginning of the summer holidays, is to be based on a periodically fixed interest rate, the analyst pointed out.
The government approved on Tuesday draft law on the First Apartment program. The solutions are to enter into force on July 1, 2023. The First Apartment program is to consist of two components – Safe Loan 2 percent and Konto Mieszkaniowe. The first solution provides for subsidies to the loan for 10 years, so that the interest rate on the liability throughout this period is 2%. plus the bank’s margin.
Interest rates in 2023
However, there are more and more voices that the Monetary Policy Council may decide to cut interest rates this year. They informed about it in the comments, e.g. economists from PKO BP and Bank Pekao. Adam Glapiński, the president of the National Bank of Poland and at the same time the chairman of the MPC, also spoke about this at a press conference on March 9. Although the head of the central bank emphasized that the Council had not announced the end of the cycle of increases and was in the “wait and see” point, he admitted that he hoped that “it will be possible to lower interest rates in the last quarter”.
– However, this is my opinion, I have not even talked about it with the members of the Council, each of them has a different vision. We don’t talk about it at all. When inflation is 17.2 percent (this is what the preliminary data for January indicated – ed.), We are not talking about reductions, we are discussing rather about increases – Glapiński reserved.
Therefore, we asked Bartosz Turk whether it is currently profitable for consumers to reach for loans with periodically fixed interest rates, given the emerging forecasts that the Monetary Policy Council may soon decide to lower the NBP interest rates.
According to the analyst, “a loan with a periodically fixed interest rate is a debt that gives a little more security and stability than a loan with a variable interest rate.” – At the same time, when interest rates start to fall, it may turn out that borrowers will have to pay extra for this additional security. This means that a loan with a variable interest rate may turn out to be a cheaper solution after years than a loan with a periodically fixed interest rate. Especially if we get into debt at a time when loans are the most expensive for years – explained the HRE Investments analyst.
A solution for people who have recently taken out a loan may be refinancing a mortgage, i.e. transferring the loan to another bank. – For example, today, for certainty and security (there is a risk of further interest rate increases), we can take a loan with a fixed interest rate, and after some time refinance it, i.e. convert our debt into another one – both based on fixed and variable interest rates – he pointed out Turkish.
What is the difference between a variable and a fixed interest rate?
A loan with a periodically fixed interest rate consists of the bank’s margin and a fixed interest rate. A loan with a variable interest rate from the bank’s margin and the WIBOR index.
As a rule, decisions of the Monetary Policy Council affect the level of WIBOR ratios. WIBOR rates include probable increases or decreases in interest rates that may occur during this period. If the housing loan has a variable interest rate, changes in WIBOR affect the installment amount.
Some banks use the WIBOR 3M (three-month) rate, which means that the interest rate on the mortgage loan is updated every three months from the moment the loan is launched. In the case of WIBOR 6M (six-month), the interest rate is updated every six months.
Currently, WIBOR 3M is at the level of 6.92 percent and WIBOR 6M is 6.98 percent.
The information provided by the banks shows that borrowers can apply at any time to change the interest rate from variable to periodically fixed.
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