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Loan installments after the MPC decision on interest rates
Glapiński: MPC does not declare the trajectory of forthcoming interest rates; circumstances are fluctuating TVN24
The Monetary Policy Council (RPP) has decreased the main interest rate to 5.00 percent. As per calculations from Rankomat.pl, the reduction in July alone will lead to a decrease of PLN 85 in a 30-year loan installment amounting to PLN 500,000.
The cumulative impact of the two rate reductions this year will lower the installment by PLN 257, changing it from PLN 3,651 to PLN 3,394. Furthermore, with each reduction, the borrowing capacity increases. Next year, some individuals may anticipate an increase in their available loan amount by over PLN 100,000.
Loan installments following the MPC decision
– The aforementioned calculations pertain to variable interest rate loans issued this year or the previous one. For older loans, the decrease will be less significant, as both the outstanding debt and repayment period are shorter, highlights Jarosław Sadowski, an analyst at Rankomat.pl.
How will loan installments adjust after the July interest rate cut Rankomat.plSadowski notes that some borrowers may continue to pay the same installment amount in July and the following months. This occurs because banks typically refresh the interest rate on loans every 3 months (at WIBOR 3M) or every 6 months (at WIBOR 6M).
– Those who have opted for fixed interest rates will experience the longest wait for a reduction in their installments. These rates usually last for 5 years. In such cases, borrowers must wait until this period concludes. Afterward, they can select a new, lower fixed interest rate or shift to variable rates, explains the analyst.
– If someone holds a fixed interest rate but does not wish to wait several years for their installment to decrease, they can transfer their loan to another bank. The new loan would then have an interest rate aligned with the current market level, he adds.
Additional reductions after the holidays?
The July reduction is likely not the final adjustment. – Numerous indicators suggest that interest rates may continue to decline. Futures contracts indicate that financial institutions are forecasting a drop in the WIBOR 3M rate to 4.03 percent within the next 9 months, states an analyst at Rankomat.pl.
– For the previously mentioned PLN 500,000 loan over 30 years, this would result in an installment of PLN 3,040, which is PLN 612 less than at the beginning of April, he adds.
Increased creditworthiness
The reduction in interest rates is making mortgage loans more accessible. Due to the cuts in May and July, an individual who could secure a PLN 500,000 loan in April will now be able to obtain PLN 537,931. If the forecasts hold true and WIBOR 6M falls to 4.03 percent, this individual would be able to borrow PLN 600,626, exceeding PLN 100,000 more than prior to the reductions.
How creditworthiness shifts after the July interest rate cut Rankomat.pl– However, it is important to remember that we are discussing solely the impact of lower interest rates. In reality, this increase may be constrained by rising living costs, which banks consider when assessing creditworthiness. We must also acknowledge the possibility of stricter regulations compelling banks to exercise greater caution in granting loans. Conversely, our calculations presume that the borrower’s income remains unchanged. However, if an individual receives a salary increase, it will undoubtedly enhance their creditworthiness, emphasizes Sadowski.
