Status: 05/31/2022 03:48 am
Because loan interest rates in Poland are mostly variable, many borrowers suddenly have to pay many higher monthly installments because of the high inflation rate. The government wants to remedy the situation – with “credit holidays”.
The dream of your own apartment or house – in Poland it threatens to become a nightmare. Alicja from Warsaw talks about a loan that she and her partner took out two years ago: “In the first calculation, the monthly rate was supposed to be 1,300 to 1,500 złoty. Now it will be 2,500 złoty,” Alicja tells a Polish radio station. “It’s a huge loss for us.”
Variable loans are becoming a problem
Monthly installments that almost double are currently not uncommon in Poland. The reason: Loans are usually granted here with a variable interest rate – without a fixed guaranteed interest rate. That was attractive in times of low interest rates, money was cheap. Because of rising inflation, the Polish central bank has now increased the key interest rate to more than five percent. The variable loans become a boomerang.
“We’ve had a credit boom in recent years,” explains financial expert Jarosław Sadowski. “With newer loans, the monthly installments are mostly interest payments, not so much repayments. When interest rates rise sharply, it has a very big impact on monthly installments.”
Government sees need for action
The rising credit rates are therefore a big topic among the Polish population. The government promises to take countermeasures. Because the financial stability of Polish families is at risk, says Prime Minister Mateusz Morawiecki. “The loan should mean a chance for many families to get a house, but it has turned out to be a burden that is beyond their own strength,” said the head of government.
The government therefore intends to take two key measures. An existing hardship fund for borrowers in need is to be increased. The banks pay into the fund. The government is also planning so-called “credit holidays”. This should allow borrowers to temporarily suspend their payments and thus extend the term of their loan. “Everyone will be able to take advantage of eight months of ‘credit holidays’ – without additional conditions or fees,” said Morawiecki when presenting the plans two weeks ago.
Limitation to financially weaker households?
The Polish banks, on the other hand, are showing great resistance. They fear billions in burdens and call for the “credit holidays” to be limited to financially weaker households. Financial analyst Sadowski, whose consulting firm has borrowers as customers, also sees that the regulation could be used by wealthy people. Overall, however, the state intervention makes sense: “If we allowed many people to be unable to repay their loans because of high interest rates, this could result in a crisis. In my opinion, that would be very dangerous.”
In addition, the financial expert argues, the banks have recently made big profits. Although they have raised lending rates sharply, savings rates on deposits have hardly risen.