Source: Kinga Warda¸ PKF Malta

In May 2012 the Monetary Policy Council in Poland increased interest rates¸ and this is likely to translate into an increase in mortgage rates. It is not the best news for credit recipients. The majority of economists felt that interest rates will remain unchanged in view of the continuing recession in the euro zone and weak manufacturing data.

NBP reference rate is currently 4.75% on an annual basis (graph number 1). In May 2006¸ the Monetary Policy Council had raised interest rates by 25 basis points to 4.75 percent. In 2011¸ they raised the interest four times: in January¸ April¸ May and June¸ by about 100 basis points.

Graph 1: Poland interest rate


Source: www.tradingeconomics.com | National Bank of Poland

However¸ the market expects that this year the basic rate will lose those 0¸25 percentage points included added spring¸ and further reductions will occur.

Certainly¸ all these people who are planning to take a loan in polish currency¸ as well as those who already took it¸ can enjoy the new trend which will increase the availability of credit and lower installment. Due to the size of the amount and long repayment time¸ every slightest change in interest rates on housing loans is noticeable in the amount of the monthly charge. Currently¸ interest rates are higher and foreign currency loans in Poland are not so popular anymore. Banks turned away from borrowing in Swiss francs and euro.

After the foreign currency loans had been completely marginalized in the market for real estate financing¸ the level of interest rates in Poland took on even greater significance for the availability of mortgage loans¸ particularly to those in the higher amount.

The European Central Bank last week revised economic projections for the euro area¸ Poland’s largest export market¸ further weakening the country’s outlook after gross domestic product grew the least in almost three years in the second quarter.

Deputy Prime Minister and Minister of Economy¸ Waldemar Pawlak said: “Today we can admit that a rise in the interest rate was a mistake. We were following completely different premises”. He explained that the reduction in the interest rates would be good for budget because it would mean a lower interest rate on the bonds.