05 grudnia 2022

Is it worth taking a mortgage now?

Is it worth taking a mortgage now?

 

Is it worth taking a mortgage now? It all depends on the individual situation of the client. With a good job, stable income and own contribution required by the bank, taking a loan now and implementing a residential investment may be a good idea, especially in the perspective of the announced price increases on the real estate market. What you will learn from this article:

  • Is it worth taking a mortgage in 2022?
  • Is it worth taking a mortgage loan now, despite the increase in NBP interest rates?

  • How do banks currently encourage the use of mortgage loans?

  • Is it worth taking a mortgage now, according to experts?

  • Is it worth taking a mortgage now or is it better to wait with the decision?

 

Are you planning to buy a house or an apartment? Secondary market or primary market are the areas where you would like to make such an investment? Or maybe you already have a building plot and want to start building your dream home?

 

From May 2020, very low interest rates of the National Bank of Poland were in force in Poland, which is why zloty loans, including mortgage loans, were very cheap. Currently, unfortunately, the situation has changed due to subsequent increases in the main interest rates by the Monetary Policy Council, which are dictated by the turbulent geopolitical situation and raging inflation. Can taking out a mortgage be a good decision at this point?

 


Is it worth taking a mortgage in 2022?

 

In 2021, Poles took out loans worth PLN 187.6 billion in Polish banks, which was PLN 46.6 billion more than a year ago. The value of newly granted housing liabilities last year amounted to PLN 88.7 billion and was more than 40% higher than in 2015. higher than in 2020. The reason for such a change was most likely the fact that the MPC maintained very low main interest rates of the central bank, and thus loans were extremely cheap due to the level of WIBOR(R), which is added to the bank margin when calculating the interest rate on PLN loans.

 

In October 2021, however, things began to change. There was an increase in inflation, and expert forecasts for 2022 were not optimistic. The MPC finally decided on the first in a series of interest rate hikes. By March 2022, they had increased six times, bringing the NBP's main reference rate to 3.5 percent.

 

The pandemic and the economic turmoil associated with it, rising prices in stores that cause an increase in inflation, as well as the indicated interest rate increases are not indifferent to the mortgage loan market. The situation on the banking market for borrowers deteriorated even more after the outbreak of war in Ukraine. In March, inflation exceeded 10 percent. on an annual basis, which puts pressure on the central bank when it comes to another increase in the main interest rates.

 

The war beyond our eastern border causes great uncertainty also for Poles. There is no doubt that in the long run it will cause many negative effects for the Polish economy. The embargoes imposed on deliveries to Russia have meant that many Polish companies have to look for completely different, new markets, and this is not an easy task.

 

So it all boils down to considering whether it's worth taking out a mortgage while the war is still going on and Putin and the Russian troops are not backing down. In addition, inflation is raging in Poland, the MPC is increasing interest rates, and the effects of the COVID-19 pandemic are still being felt by us. Banks still offer mortgage loans, and the higher interest rates are offset by lower margins or commissions charged for the client's accession to the loan agreement.

 

 

 

Is it worth taking a mortgage loan now, despite the increase in NBP interest rates?

 

The NBP interest rate increases are aimed at protecting the value of Polish money on the financial market, as well as curbing inflation, which in March 2022 amounted to 10.9 percent. For the first time in years, inflation in Poland in 2022 exceeded a two-digit threshold. In response to the current situation in the country, the President of the National Bank of Poland said that the MPC would raise interest rates until inflation slows down.

 

There is no one universal, always right answer to whether it is worth taking a mortgage now. The discussion forum where borrowers - future, former and potential - present diverse positions on this issue.

 

Much depends on the individual financial, housing, family and material situation of a given person. It must have a sufficiently high initial capital to count on a loan and a good creditworthiness, which is gradually decreasing as a result of rising mortgage loans.

 

Liabilities may become more expensive as the NBP does not rule out further interest rate hikes. Nevertheless, a mortgage with a fixed interest rate excludes the need to take the risk of such a change. In the longer term, economists predict that inflation will fall and interest rates may be lowered to 1.5 percent in mid-2023. Therefore, the credit conditions will be appropriate. However, no one knows whether such a scenario will be covered in reality.

 

When is it not worth deciding on a mortgage?

 

Taking out a mortgage under the current offer conditions in Polish banks will not be the right decision in every case. It is certainly worth refraining from making such a decision if the potential borrower has an extremely low capacity. It is true that he is able to incur a liability, present the required own contribution or secure its missing part with the use of appropriate insurance, but with any change in interest rates or loss of job, he will not be able to repay subsequent capital and interest installments.

 

experts indicate that low creditworthiness is an additional risk - both for the bank and the client himself. Therefore, he should consider whether to postpone the decision on housing investment and taking out a mortgage.

 

As a result of the increase in interest rates, the cost of money increased, which also changed the banks' estimates of the creditworthiness of customers. The loan amount that a household with an income of around PLN 6,200 per month can effectively apply for has fallen by as much as PLN 100,000. PLN in a few months. It is therefore possible that when incurring a liability, the customer will be forced to settle for a lower amount.

 

Who should take advantage of a mortgage now?

 

Pandemic, inflation and Russia's invasion of Ukraine mean that not everyone in Poland is sure of the future, and thus some of us are postponing the possibility of undertaking a larger housing investment. So the key question is whether it pays to take a mortgage now. If someone has been thinking about buying a property for some time, they should not necessarily postpone such a decision for a later time. If he has a stable financial situation, a permanent job and a good profession, it may be better to take out a mortgage right away and buy a flat.

 

Delaying the decision may mean that the given apartment will no longer be available or you will have to spend much more on it than at present, which in turn will affect the creditworthiness of the potential client. It should be remembered that the real estate market is doing quite well in Poland, despite the pandemic or rising inflation and interest rates. It is stable and housing prices are actually at a high level. Further price increases can be expected in the future, although perhaps not as dynamic as in the last several months of 2020 and 2021.

 

If you have accumulated the necessary funds for your own contribution, you have stable employment and regular income - see how to take a mortgage step by step!

 

How do banks currently encourage the use of mortgage loans?

 

Banks are trying to attract new customers. In January 2022, they processed an increased number of mortgage loan applications, but in February and March 2022, the number of such applications significantly decreased. It can be concluded that customers are wondering whether it is worth taking a mortgage now or is it better to wait.

 

At the same time, banks offer the option of taking out a loan with a fixed interest rate, negotiating a bank margin with good capacity or a high own contribution, or refinancing a mortgage loan. See why it is worth taking such a commitment right now!.

 

A mortgage with a fixed interest rate

 

Central bank interest rate volatility is a fact. This was easy to see over the last six months. In September 2021, the main NBP reference rate was only 0.1 percent. In the following months of the same year, interest rates increased. Already in December 2021, the reference rate was 1.75 percent, and in January it was increased to 2.25 percent. In February and March 2022, there was another increase in interest rates, as a result of which they are the highest since 2014.

 

In the fall of 2021, banks offered loans with a fixed interest rate of around 4%. per annum, while the variable interest rate was lower. Unfortunately, but currently fixed mortgage rates mean you have to agree to a rate of around 7%. per year. So you have to pay a lot for the comfort of not having the risk of changing the interest rate.

 

The appearance of loans with a fixed interest rate on mortgages on the market was dictated by the recommendation of the Polish Financial Supervision Authority. It instructed banks to extend their offers by June 2021 to a housing loan with a fixed interest rate for a minimum of 5 years. For example, on March 15, 2022, Bank BNP Paribas announced that it was offering its customers a loan with a 10-year fixed interest rate.


 

Lowering the margin on mortgage loans

 

A customer applying for a bank loan for the purchase of real estate has the option of negotiating the cost of liabilities. While we have virtually no influence on the WIBOR(R) ratio, the customer can negotiate with the bank the amount of the bank margin, i.e. the second component of mortgage interest rates.

 

Higher interest rates that are currently in force in Poland create space for both banks and potential customers to lower the credit margin. So you can get a commitment from the bank with a margin of up to 1.8 percent. or lower. It is worth recalling that the average mortgage loan margin in the third quarter of 2021 was 2.22 percent.

 

Of course, successful negotiations will be the result of individual discussions between the lender and the borrower. The bank will be willing to lower the margin if the customer has a good financial standing and does not pose a high risk to the banking institution.

 

Possibility to refinance a mortgage

 

Even if you take out a mortgage now, and the predictions about interest rate increases in the future will not be confirmed, only the MPC decides to lower them, you will be able to refinance your mortgage. It consists in transferring it to another bank where you will be able to get better repayment terms.

 

Is it worth taking a mortgage now, according to experts?

 

Real estate market analysts are convinced that prices on the Polish market will continue to rise. This is indicated by the historical, over 90% correlation of real estate prices with the average salary. Meanwhile, according to forecasts, wage growth will amount to around 8%. annually. The costs of building houses and apartments are rising, and high inflation makes it much more expensive in the future.

 

Is it worth taking a mortgage now? As long as the client has a good job and a stable financial situation, maybe yes, but everyone should consider it for themselves, given their own situation.

 

 

Is it worth taking a mortgage now or is it better to wait with the decision?Possibility to refinance a mortgage

 

The decision on whether it is worth taking a mortgage in 2022 requires thorough consideration. Emotions are a bad advisor, so it is good to consult specialists. They, in turn, calculate that since the cost of credit is lower compared to the rate of price growth on the real estate market, it does not pay to wait any longer before making such a decision.

 

The cost of buying a house or apartment from year to year may be higher and higher NBP interest rates will not stay with us forever. They will most likely be in force in 2022 and until mid-2023. They may go down a bit after that. Postponing the decision to buy an apartment or other real estate for a mortgage from the bank may mean that in some time the lender will not grant the commitment due to too low capacity and own contribution compared to the new price of the real estate.

 

Remember that if you have any doubts, I am happy to offer you advice and assistance. Let's meet, you will find that my help in choosing the best mortgage can be invaluable.

 

Feel free to comment. Is the topic of credit analysis interesting for you? Let me know in the comment. Will be happy to help clarify all issues. It is important to me that every topic regarding the mortgage is absolutely explained.

 

 

 

CONTACT ME >

Mortgage broker

Michal Kaplon

os.Stefana Batorego 80

60-687 Poznan

Strona www stworzona w kreatorze WebWave.