Mortgage loan – fixed or variable interest rate?


As expected, the Monetary Policy Council did not change the level of interest rates. “Installments of mortgage loans already being repaid will not change. Unfortunately, in recent months the interest rates on newly granted loans have been increasing,” points out Jarosław Sadowski from Expander. For people currently taking out mortgage loans, one of the important issues is whether to choose fixed or variable interest rates.

On Wednesday, the two-day meeting of the Monetary Policy Council (MPC) ended, deciding not to change interest rates. The main NBP rate, the reference rate, remains at 5.75%.

“Currently, the prevailing view is that we will not see this year interest rate cuts. Loan rates will therefore remain at quite high levels. This is particularly true for those granted during the period of record low interest rates during the pandemic. In such a case, the rate is usually about 87 percent higher than in the initial repayment period. For example, the rate for a PLN 400,000 loan for 25 years increased from PLN 1,564 to PLN 2,920. Fortunately, this year, the following rates are still in force: credit holidaysso such people should be able to cope with the repayment – writes Jarosław Sadowski in the commentary.

He points out that despite the fact that the Monetary Policy Council does not change interest rates, the interest rate on newly granted mortgage loans is rising. “According to NBP data, this year the best conditions were in force in February, when the average interest rate was 7.59%. In May, it was already 7.83%. Such an increase increases the installment of a PLN 400,000 loan for 30 years by PLN 66. Over the 5 years of fixed interest, this gives an increase in the cost of the loan by PLN 3,975,” we read in the commentary.

Sadowski adds that the above-mentioned increase in interest rates is not artificial, caused by, for example, a larger number of borrowers with low own contribution“Data collected by Expander shows that from February to June, as many as eight banks increased fixed interest rates in their offers for clients with a high down payment (over 20 percent of the down payment). The record holder introduced an increase of as much as 0.79 percentage points,” he emphasizes.

Fixed or variable interest rate?

For people currently taking out mortgages, one of the important issues is whether to choose a fixed or variable interest rate. “Variable interest rates tempt with the prospect of interest rate cuts. Fixed interest rates are more popular because they are currently lower. The average fixed rate in June offers was 7.72%, and variable interest rates were 8.15% (for an own contribution of over 20%). The difference is therefore small, at 0.43 percentage points. A 0.5 percentage point reduction in interest rates is enough for the variable interest rate loan installment to become lower than the fixed rate,” writes Sadowski.

According to him, when deciding on the type of interest rate, it is worth remembering that forecasts do not always come true. “If rates unexpectedly started to rise again, variable interest rates could become a trap. In the initial repayment period, installments are very sensitive to changes in interest rates,” he emphasizes.

The key to making a decision is not only the forecasts regarding interest rates, but also the extent to which we use our creditworthiness. “If the installment is so high that paying it off is a considerable effort for our household budget, it is worth considering a fixed interest rate. An increase in the installment would be very dangerous in such a case. On the other hand, if the installment absorbs less than 20 percent of our income, we can afford some risk and choose a variable interest rate,” Sadowski sums up.

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