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Tuesday, November 30, 2021

WIBOR increase – mortgage loan installments may increase by one fifth. Expander analysis

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The WIBOR 6M rate increased to 1.91 percent and is at the highest level since February 2015 – points out Jarosław Sadowski, chief analyst of Expander Advisors. He emphasizes that many people who took out mortgage loans after this period will soon pay the highest installment in history.

The analyst explains that “the mortgage interest rate is the sum of the margin entered in the loan agreement and the WIBOR rate”. He adds that “most banks use the 3M WIBOR rate and update the interest rate every 3 months”.

“The WIBOR 6M rate is used by PKO BP, Bank Pekao, ING Bank Śląski and BOŚ. The group is not very numerous, but it is often responsible for more than half of the value of newly granted mortgage loans. This means that many borrowers who will soon face an updated interest rate , will pay a much higher installment “- he emphasizes.


From the lowest to the highest installment

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The interest rate on loans based on the WIBOR 6M rate is usually updated every 6 months from the moment the loan is disbursed. “This means that for those that will be updated in the near future, the WIBOR level from May was in force so far. Back then, the WIBOR 6M rate was only 0.24 percent, which was the lowest level in history” – notes Sadowski.

He adds that now “interest rates will increase significantly” and “for loans granted from March 2015 onwards, this new rate of interest will be the highest over the entire maturity period.”

“As a result, the installment in such cases will increase from the lowest to the highest level. In the case of a loan of PLN 300,000 for 30 years with a margin of 2.09% (granted a year ago), the installment will increase from PLN 1,159 (paid for the last 6 months). ) to PLN 1,424 (valid for the next 6 months). The increase will therefore amount to PLN 265, or as much as 22.9 percent. ” – he writes in the analysis.

He also explains that “in the case of loans repaid in those banks that use WIBOR 3M, the interest rate update in the near future will also bring a significant increase in installments.”

“Three months ago, WIBOR 3M was 0.21 percent, and now 1.61 percent. In the case of the previously described loan granted a year ago, but with an interest rate based on WIBOR 3M, the installment will increase from PLN 1,154 to PLN 1,374. So it will be higher by PLN 220, or 19 percent. In the case of older loans, the installment after the increase will still be lower than immediately before the pandemic. Then the 3M WIBOR rate was 1.71 percent. ” – Expander analyst explains.

Examples of changes in the amount of installments in the case of updating the interest rateexpander.pl

Which loan should I choose?

Sadowski also gives tips for people who are wondering whether to choose a loan with WIBOR 3M or WIBOR 6M. “The first index is now much lower and amounts to 1.61 percent. WIBOR 6M is 1.91 percent.” – indicates.

“In a very general comparison, however, let’s assume that we have two almost identical offers to choose from. They have the same margins, commissions and other elements. The only difference is that one bank bases its interest on WIBOR 3M, and the other on WIBOR 6M. In this case, the first one, that is based on WIBOR 3M, seems to be the better offer “- he says.

Then he explains that “if the margin is, for example, 2 percent, then at the current level of rates, the interest rate on the first loan will be 3.61 percent, and the second loan will be 3.91 percent.”

“It is true that in the future the difference between these rates will probably decrease, but usually WIBOR 6M is higher than WIBOR 3M. This is because WIBOR 3M is an interbank interest rate for 3 months, and the latter for 6 months. A longer period, this is a greater risk and therefore the interest rate is usually higher, “he explains.

Sadowski sums up that “if the interest rate on a loan based on WIBOR 6M is lower or very close to that of WIBOR 3M, there is a chance that in the long run the one with WIBOR 6M will be cheaper”.

“However, this is provided that other loan parameters are similar. If, however, the interest rate on a loan based on the 3M WIBOR rate is much lower, it is better to choose such an offer. Let us add that the interest rate taken for such a comparison should be calculated by yourself – adding the current amount to the offered margin. appropriate WIBOR rate as the interest rate quoted by the bank may include WIBOR from several months ago “- he emphasizes.

Interest rates

In early November The Monetary Policy Council raised the NBP interest rates on Wednesday. According to the statement of the central bank, the reference rate was raised by 75 basis points to 1.25 percent.

NBP reference ratePAP / Adam Ziemienowicz

Main photo source: Shutterstock

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