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Mortgage loans – interest rates and WIBOR. Installments of some mortgage loans will fall – Jarosław Sadowski from Expander comments

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NBP interest rates remain unchanged. “Once again, some borrowers can count on a decrease in installments” – pointed out Jarosław Sadowski, chief analyst at Expander Advisors. The reason is the decline in WIBOR indices, which determine the interest rate on the loan.

The Monetary Policy Council during its April meeting kept the NBP interest rates unchanged. The main, reference interest rate is 6.75 percent. “Despite this, the installments of some mortgage loans will fall anyway. This will happen because WIBOR rates have been falling recently,” said Jarosław Sadowski, chief analyst at Expander Advisors. WIBOR together with the bank’s margin are components of the loan interest rate.

The decrease in the amount of installments will apply to loans with a variable interest rate, which will have updated interest rates in the near future. “This will happen because banks update the interest rate on such loans once every 3 months or once every 6 months. Meanwhile, on the last day of the first quarter, the WIBOR 3M rate fell to 6.89 percent, the lowest since June 2022. In turn, the WIBOR 6M rate amounted to 6.95 percent, which is also the lowest level since June 2022.

WIBOR 3M in the last three monthsstooq.pl

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WIBOR 6M in the last three monthsstooq.pl

Interest rates and loan installments

As he pointed out, six months ago WIBOR 6M was 7.41 percent, and now it is 6.95 percent. “For example, the interest rate on a loan with a margin of 2.21 percent will fall from 9.62 percent to 9.16 percent. As a result, the installment of the loan for PLN 300,000 for 30 years, taken out in March 2021, will fall from PLN 2,501 to PLN 2,406 Sadowski said.

“The difference in the installment amount is PLN 95, but it is worth adding that the new interest rate will be valid for 6 months. During this period, the savings will amount to PLN 573 in total” – noted the analyst.

The installments of loans based on the WIBOR 3M rate will decrease to a lesser extent. “However, this does not mean that these borrowers are in a worse situation. It’s just that here the update takes place more often (every 3 months), so changes in WIBOR rates are taken into account faster. Such people have already felt a slight decrease in installments at the beginning of the year, and now their installment will fall again” – said Jarosław Sadowski. His calculations show that in the case of a loan of PLN 300,000 for 30 years with a margin of 2.21 percent. the installment will be PLN 26 lower – a decrease from PLN 2,425 to PLN 2,399.

Expander Advisors

The interest rate is updated by summing up the current WIBOR rate and the margin. As a rule, the margin is fixed during the repayment period. “Its amount is written in the loan agreement. In turn, WIBOR changes and therefore the interest rate changes” – explained Sadowski.

On the other hand – as the analyst noted – despite the recent reductions, the installments of the loans described above are still more than twice as high as in the initial repayment period. For example, the installment of a loan based on WIBOR 6M fell to PLN 2,406, but initially it was only PLN 1,179.

Main photo source: Shutterstock

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