In: Root » Legal and finance » Loans and mortgages
Affordability of mortgage loans Housing loans have become more affordable due to the improvement of market-based mortgage credits which has made mortgage maturity terms on offer for 25-30 years (for an effective average maturity of 19 years by 2004, and a net average term of 14 years after prepayment). Furthermore, those purchasing additional credit insurance benefit from 80 to 100% LTV ratios. With the gradual decline of inflation the past production of Dual Index Mortgage loans was discontinued and replaced by a combination of hardcurrency denominated loans and Warsaw Inter Bank Offered Rate (WIBOR) based adjustable rate mortgages. Furthermore, there has been a fierce competition between banks offering cheaper mortgage rates (7.5-8.5% in PLN in 2004 and lower observed credit rates below 7.5%) as a result of lower inflation rates and reduced margins. Mortgage rates in 2004 were priced at 3-months Wibor+1.5%. Some banks even charged a lower fixed 5.5% rate, but only during the 'teaser' first year. The CHF-denominated housing loans were priced around 5% in 2004, and became even more attractive in 2005 through 3.75-4% credit rates (sometimes lower 1.25-2% 'teaser' rates during the first year). The practice of commissions and fees follows no general pattern across banks (World Bank, 2006). Evolution of housing mortgage loans Compared with the average in 15 older EU members, the level of individual housing loans had remained low. As indicated in Table 6.9, by the end of 2004, Poland ranked lower than several other new EU members including Hungary, the Czech Republic, Croatia and the Baltic countries. On the other hand, Poland ranked higher than the other transition countries such as Slovenia, Romania, Bulgaria, and of course Russia, Ukraine and Kazakhstan. The accelerating trend observed in 2005 suggests that Poland is catching up rapidly with the most advanced group of new EU countries, as far as the magnitude of its residential mortgage market is concerned. The growth of banking credit to the Polish economy has been slower than the growth of housing finance. The nominal stock of housing debt has multiplied by 2.7 times in the last 3 years. The debt was only 1.2% of the GDP by the end of 1999 and this proportion has multiplied by a factor of 3.3 in 5 years. Compiled data by the PBA represented in 2004, indicated that 88% of the individual housing loans were extended by all banks. The net outstanding stock of individual housing loans has increased by 61% in 2002, 45% in 2003, 27% in 2004 and by 41% in 2005 of which 40% are reported by banks to finance transactions in existing housing units. The demand for housing and mortgage credit The housing finance sector in Poland has made substantial progress in recent years. This has been due to the growing number of lending institutions, increased competition for mortgage business, and the gradual removal of many administrative and legal constraints. Measuring demand for housing in Poland is not an easy task despite the fact that demand for housing has been growing. This might be due to the fact that the level of housing completions may understate actual activity.
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