Changes in interest rates affect the economy and thus change our financial situation. Mortgage repayments during the pandemic were favourable – this was ensured by the Monetary Policy Council's decision to lower interest rates. It has resulted in a significant reduction in mortgage repayments. Today, holders of variable-rate mortgages have plenty to fear. Raising interest rates will undoubtedly lead to higher mortgage costs.
The rise in interest rates has left borrowers worried about how expensive their mortgages will become. Unfortunately, their fears are well-founded. The main cost of mortgages is the interest rate. When the interest rate rises, the repayment amount will increase because it is affected by the WIBOR.
For bank customers who chose a product with a variable interest rate, no matter the loan amount, the most favourable situation was the low interest rates, which persisted in Poland at the beginning of the coronavirus pandemic. The current situation is particularly difficult for those who have enjoyed favourable rates throughout their mortgage term.
The change in a mortgage's interest rate depends on the specific mortgage agreement. That's why it's so important to read its contents carefully before committing.
The point at which the interest rate increases depends on the point at which the WIBOR changes. This can occur every 1, 3 or 6 months. In the case of WIBOR(R) 3M, you should expect an increase or decrease in your repayment every quarter.
The reference rate is not influenced by the borrower or the bank. The reference rate is regulated by the Monetary Policy Council. Mortgages will be affected by the current changes, and the specific timing of the increase in mortgage repayments will depend on the contract terms.
How much more will the average borrower pay? An increase in WIBOR(R) 3M by just over one percentage point for a repayment amount of PLN 1750 can lead to a rise in the repayment by as much as PLN 250.
You can protect yourself against rising interest rates by taking out a fixed-rate mortgage. On an annual basis, higher repayments may occur when the interest rate is lower, but any increase in interest rates for such borrowers will not result in repayment problems.
How is it possible? When the borrower chooses a variable interest rate, the repayment amount is a combination of the bank's fixed margin and the WIBOR, which changes every few months. The largest Polish banks and the NBP President warn that the decision to take out mortgages with variable interest rates involves risk. Any decision to do so should be made well-informed.