SUPPORT FOR BORROWERS IN „PLN”

The Monetary Policy Council began a cycle of interest rate hikes from October 2021. The main reference rate rose to 6.5 percent from 0.1 percent, which was at its lowest level to date and was in effect during the pandemic. This is the tenth consecutive increase and is due to the rise in inflation and the weakening of the zloty. The NBP said in a communiqué, "The Council assessed that the risk of inflation forming above the NBP's inflation target over the monetary policy horizon remains. In order to mitigate this risk, and thous aiming to reduce inflation to the NBP target in the medium term, the Council decided to raise the NBP interest rates again. The increase in NBP interest rates will also have an impact in the direction of reducing inflation expectations."

The MPC's decisions have a negative impact on those who have taken out liabilities in PLN, as interest rates that depend on the NBP reference rate are applied to them. The increased rates hit bank customers who took out mortgage loans the hardest. Especially those who obtained loans when interest rates were at their lowest, and right now their installment consists mainly of interest.It is estimated that the mortgage installment has increased by up to about 80%.

To support borrowers, the Law on Community Financing for Business Ventures and Borrower Assistance was enacted. The most common element of support is the credit vacation, which can be used by anyone holding a PLN mortgage taken out for their own housing purposes. Following Senate amendments, this support also extends to those who took out a mortgage before 2017. Customers who took out a loan with both variable and fixed interest rates can benefit from the support, but just one loan can be covered. The loan vacation will be in effect from August 2022 to the end of 2023, and assumes a suspension of a total of 8 loan installments in 2022 and 2023 (in 2022 – 2 installments per quarter, in 2023 – 1 installment per quarter). This will result in a longer loan term duration in total, but provides real relief for those whose installments have increased significantly. Borrowers can set aside the money they save and use it to make an early partial repayment of the loan.

Banks have opposed the introduction of such broad support for borrowers citing lost benefits. According to analyses by the National Bank of Poland, the cost of credit vacations could reach nearly PLN 20 billion. On the other hand, according to the ZBP's calculations, assuming that 80 percent of those eligible will benefit from this solution, the total cost to banks would reach PLN 13.1-16.4 billion in 2022 and PLN 21.3-27.9 billion in the period 2022-2023.

The enacted legislation introduces an additional payment of PLN 1.4 billion to the Borrower Support Fund, which can be used by people in financial difficulties. The following conditions must be met together:

– at least one of the borrowers who signed the contract has the status of an unemployed person;

– the amount of installments and other expenses exceeds the level of 50% of the joint income during the month;

– per capita income after deducting repayments is max:

– PLN 1552/month for a single person;

– PLN 1,200/month for a multi-person household.

The law also introduced provisions forcing banks to move away from WIBOR, which is based on interest rates on loans between commercial banks. The Financial Supervisory Commission, together with the Financial Stability Committee and in consultation with private companies, are to develop a replacement. In the absence of its determination, the law envisages replacing WIBOR with the POLONIA index. It is to be set by the NBP. The legislator assumes that the changes made will save borrowers PLN 1 billion a year.

The law on financing of the community for economic ventures and assistance to borrowers, after the introduction of amendments by the Senate, was passed by the Parliament on July 7, 2022, and awaits the President's signature.