The financial industry is witnessing a clear recovery in the mortgage market. In the second quarter, Poles signed up for PLN 11 billion, but many of them held back on their applications until the 2% first-home loan came into effect in July. Consequently, banks have been recording several hundred percent increases in the number of applicants over the last two months. Currently, three out of five applications are related to this program. Many customers interested in homes from the secondary market waited for another favorable change – from September 1, one no longer has to pay a civil law transaction tax on such a transaction.
Data from the Credit Information Bureau shows that in July, banks granted 11.1 thousand loans amounting to PLN 4.16 billion, marking another month of much higher lending activity than the previous year. Meanwhile, in August this year, a total of nearly 38.9 thousand potential borrowers applied for a housing loan, compared to 12.4 thousand a year earlier – this is an increase of 213.8 percent, and the value of mortgage loan inquiries increased by almost 300 percent. This was also due to an increase in the average loan amount applied for by as much as one-fifth compared to August 2022. The revival of the market is mainly thanks to the government’s Safe Loan 2% program.
“From July, we have been observing huge interest in this loan, in August there were over 40 thousand applications. Remember that we have already observed such numbers in the past, in the record year of 2021, but this year only three banks initially joined this program, so these 40 thousand applications were spread over three market participants. This has a major impact on the time taken to consider applications, as three banks have to essentially service what virtually the entire sector served in 2021,” says Rafał Litwińczuk, Deputy CEO of Alior Bank, to the news agency Newseria Biznes.
Today, 11 banks are already offering the government program. BIK estimates that over 60 percent of all applications currently submitted by customers in banks are applications for a 2% loan. Alior Bank was one of the banks that joined the program in July this year, additionally introducing a voucher for borrowers worth PLN 4,000 in partnership with contractors such as Euro AGD, Media Expert, Comfort, Agata Meble or Vorwerk, which sells thermomixes.
Forecasts for the following months are very promising, especially since from September 1, a customer buying their first home on the secondary market does not have to pay a civil law transaction tax. Many customers were waiting for this legislative change, holding back on submitting loan applications. The Safe Loan 2% program can be used both on the primary and secondary markets.
As reported by AMRON-SARFiN, already in the second quarter of 2023, i.e., before the launch of government subsidies, a revival was visible. The number of housing loans granted was 30,798, or 40.19 percent more compared to the previous quarter, and their value was PLN 11.3 billion, which means an increase of 51.22%. In relation to the same period last year, these are still lower numbers. According to data from the NBP, in the second quarter of 2023 banks tightened their credit policy again, maintaining the current conditions for granting housing loans. Individual banks increased the margin for high-risk loans and others, and decreased the borrower’s own contribution.
The high interest in the Safe Loan 2% means a significant advantage of loans with a fixed interest rate over those with a variable rate. This is despite announcements of interest rate cuts. On September 6, the Monetary Policy Council cut interest rates by 75 basis points, lowering the reference rate to 6 percent despite inflation still exceeding 10 percent annually. This came as a surprise to markets, which were expecting a cosmetic cut of 25 basis points. This reduction may result in a temporary decrease in mortgage installments (based on WIBOR, not on the official NBP rates, but they also recorded a decline of 0.7-0.8 percentage points).
“A loan with a periodical interest rate for the first five years is very desirable in the market right now. It is estimated that currently over 60 percent of activated loans are on a temporary fixed rate. In some banks, we know that this percentage is slightly higher, but the market average is above 60 percent, which is a completely new phenomenon, as customers have so far chosen variable interest rates,” informs Rafał Litwińczuk. “This is due to customers understanding the issue of interest rate volatility and their desire to secure this interest rate. The second reason is also the cost of this loan, considering falling interest rates and market and customer expectations that these rates will be lower in the future, customers simply choose the cheaper solution. So, the fixed rate is not only a chance for them to secure their future payments, installments, but it is also a cheaper solution for them.”
