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The credit capacity of potential borrowers is increasing
- 25 January 2023
The creditworthiness of Poles is increasing, and its gradual reconstruction has been going on for half a year – this is the result of the analyses by HRE Investment experts of January. This is undoubtedly positive news for all borrowers, especially considering the current forecasts regarding the cost of money, activities of supervisory authorities and salary increases.
HRE gives as an example a family of three earning two national averages. Currently (as of January 2023), it can take a loan of over PLN 462,000 for an apartment, i.e. over 12 thousand PLN more than a month ago. For comparison, after the interest rate increases by the Monetary Policy Council in July last year, i.e. at the worst moment, the borrower could only count on PLN 392,000 mortgage loan. Since then, the creditworthiness of Poles has increased by 17 percent, but it is worth noting that there is no shortage of premises that this trend will continue.
What affects our creditworthiness?
Experts from HRE Investment point to several factors that hindered the declining creditworthiness of Poles:
- Growing salaries (according to the Central Statistical Office data from November 2022, salaries increased by almost 14% during the year)
- Increased competition between banks for the dwindling group of customers (reduction in loan margins, promotions, including the sources of income such as the 500+ program, rental income, contracts for specific work, etc. in the creditworthiness ) .
- A decrease in WIBOR, i.e. the interest rate component of mortgage loans (a decrease in the rate to 6.9%, which is the lowest result since June 2022).
Is there a chance to reduce interest rates in 2023?
The economists and their forecasts expect interest rate cuts in the second half of 2023 . The recent decisions of the Monetary Policy Council, which has left the interest rates unchanged for four months, have also improved the situation of people applying for loans. If economists’ predictions turn out to be correct, there will be an even larger increase in Poles’ creditworthiness.
– Futures contracts as of today suggest that WIBOR 3M may be 6% in a year, or even below 6%. Moreover, in 2024, the cycle of interest rate decreases is expected to accelerate – at least that is what the current quotations of interest rate futures suggest – explains Bartosz Turek from HRE Investment
According to NBP analyses, Poles’ salaries will be increasing.
The current situation of our salaries has an important impact on the credit policy. If we earn more, the banks will grant us higher loans. This is best illustrated by a simulation performed in November 2022 by NBP analysts. It shows that salaries in Poland will increase in the following tendency: by 11.9% in 2023, 7.6% in 2024 and 5.9 percent in 2025.
Will WIRON replace WIBOR?
There is more and more talk about changing the WIBOR index to WIRON, thanks to which the interest rate and, consequently, the installments will change every month instead of every 3 or 6 months, which is the case currently (WIBOR 3M and WIBOR 6M). Importantly, the change even saves one installment a year. The WIBOR index, which, together with the bank’s margin, determines the interest rate on most loans, will be eliminated and a new WIRON indicator will appear in its place. So there is a chance that new loans will be a little cheaper and easier to access, as HRE predicts.
It is also worth adding that the Polish Financial Supervision Authority is considering lowering the buffer for interest rate increases on loans with a periodically fixed rate. This buffer is currently as high as 5%. It means that when examining creditworthiness, the bank must add 5 percentage points to the applicable interest rate. According to HRE experts, halving this indicator would result in an increase in creditworthiness by 15-20%.
Creditworthiness in banks – January 2023
To better illustrate the creditworthiness of Poles (as of January 2023), Finamax presented an analysis divided into four criteria:
1. a single person: 30 years old, income: PLN 5.5 thousand net
2. a couple: 30 years old, income PLN 9,000 net
3. a couple + 1 child (2+1): 30 years old, income PLN 10,000 net
4. a couple + 2 children (2+2): 30 years old, income PLN 12.5 thousand net
The analysis takes into account the current NBP reference rate of 6.75%. The goal is: purchase of an apartment, a 30-year commitment and maximum LTV in a particular bank, equal installments, an offer with a variable interest rate.
According to the above analysis by Finamax , the situation looks optimistic and certainly gives a clear picture of the creditworthiness of Poles in the context of purchasing an apartment. However, creditworthiness is only one of the features of the bank’s offer that must be analyzed when choosing a mortgage. Equally important are the required level of own contribution, the accepted income, fees, the interest rate and margin.