Friday, 11 December, 2020

Borrower pushed to the corner

Installments of loans in USD and EUR up. The activities of the Monetary Policy Council resulted in three interest rate increases in one quarter.

The three-month GFIC based on which the mortgage interest rate in USD is determined is now the highest in two years. As a result, the interest rate on loans in USD and monthly installments are increasing.

As calculated by Open Finance analysts, the cost of taking out a loan in USD will increase by 2-2.3 percent. Falling margins (currently an average of 1.3% for loans with own contribution) only slightly offset the growing cost of loans in the native currency.

Cost of mortgage loans


The cost of mortgage loans in USD is also rising, because Good Finance, responsible for the interest on those loans, is climbing up. Lifting again by the Good Finance Bank at the end of May this year. interest rates in the euro area by 0.25 percentage points According to Open Finance analysts, it will increase the installment of loans taken in this currency by about 1 percent.

Therefore, from July 13 this year. the main refinancing rate will be the highest since March 2009. Analysts of the Notus Credit House estimate that the 3-month Good Finance rate, which has been rising for 15 months, will rise this year because inflation is rising in Euroland.

Notus’s calculations show that borrowers taking a loan in USD at the end of last year in the amount of 300,000. USD for 30 years with a margin of 2.5 percent (assuming a 6% spread) they were charged with a monthly installment of approx. USD 1,429. Borrowing the same amount from a bank today, they have to spend more than USD 100 more (USD 1533) on its repayment every month.

Borrowers’ creditworthiness decrease, i.e. a new recommendation


At the beginning of July this year, some provisions of the amendment to the Recommendation S of the Polish Financial Supervision Authority enter into force. The most important changes for bank customers will, however, take effect at the end of this year.

The new recommendation, which is a few months will drastically reduce the possibility of taking foreign currency loans, contains two key provisions. The creditworthiness of potential borrowers will decrease significantly because banks will consider each loan application as if the loan was drawn for a maximum of 25 years.

Given a popular 30-year loan, this means a borrower’s creditworthiness decreases by about 10 percent. In addition, the amendment assumes that the total amount of monthly installments of loans in the case of foreign currency liabilities should not exceed 42 percent of the borrower’s income. This, in turn, causes the creditworthiness to shrink by another 5 percent (Open Finance).

Due to the announced changes in the mortgage market, there is now a greater interest in flats among those planning a change in housing. – Despite the holiday period, more and more people interested in buying an apartment in the Kościuszko Residence in Piastów, located just outside the capital, are coming to our sales office.

Those looking for flats are afraid that the new regulations in banks in a few months will block them from taking a sufficiently high loan. In addition, we cannot complain about the lack of interest in the investment due to the offered asking rates (from USD 6048 / sq m), which are significantly lower than Warsaw prices. The more that buyers can collect their keys to the apartment before the end of this year – says Sean Cole, Marketing Specialist at BARC Warszawa SA

Cutting government credit subsidies


Also, almost the whole list of changes in the regulations regarding the granting of state subsidies to mortgage loans, which are likely to come into force already on holiday, changes for the worse for borrowers. The only positive one is joining the group of beneficiaries of lonely persons and people in partnerships.

However, in this case, the legislator provides for a smaller additional payment (only up to 30 sq m of housing) than for married couples. Among the amendments just adopted by the Senate is the one that (apart from single parents) limits the age of people applying for loans in the Rodzina na swoim program to 35 years.

The biggest problem for apartment buyers, however, will be lower price limits per sqm. flats eligible for funding. They will fall so much that in most cities finding any premises that meet the requirements will be extremely difficult and in some even impossible.

In cities such as Wrocław, Bydgoszcz, Toruń, Łódź, Kraków, Gdańsk, Olsztyn, Poznań the amendment to the Act will bring price limits down by almost 43 percent. for real estate on the secondary market and 28.6 percent in the primary market.

In 13 cities surveyed by Home Broker analysts, the pool of flats for which you can get a loan with a surcharge will shrink from 66 percent. up to 10 percent market offer. In Białystok, Gdynia, Kraków, Lublin, Poznań, Szczecin and Wrocław, the program will practically cease to operate.

The amendment to the RnS program does not bode well for apartment buyers. Some buyers will soon not be able to take advantage of subsidies, which for a loan of USD 300,000 for 8 years could amount to over 70 USD.

The monthly repayment installment with a regular loan will be 1.8 thousand. USD, instead of just 1 thous. zł. for a loan with an additional payment (Home Broker).

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