The Pole pays five times more on the mortgage than the Frenchman.  Why are we so extravagant?

According to European Central Bank data, the average mortgage interest rate in Poland was 9.07% in September 2022. Since then, the situation has not improved at all. If we take into account the current WIBOR 3M rates (7.31%) and 6M (7.50%) and add to them the average mortgage loan margin, which, according to AMRON-SARFiN’s report for the second quarter of 2022, was 1, 98 p. It turns out that the average interest rate is higher and amounts to 9.29 percent. (WIBOR 3M), and up to 9.48 percent. (WIBOR 6M).

From mid-2021, banks are obligated to offer fixed-rate mortgages. Unfortunately, their interest rates are currently not as favorable as one would imagine. Banks locked interest rates at record high levels. How much is it? I will show it on the example of several banks.

⦁ ING Śląski Bank 9.18%. (light installment promotion), 9.48 percent. (Easy Start promotion) or 9.58 percent. (standard rate of interest),

⦁ Millennium Bank, its amount depends on the level of LtV and amounts to 10%. (LtV up to 80%) and 10.89% (LtV from 80.01% to 90%),

mBank’s promotional interest rate is 9.72 percent. (LtV up to 80%) and 10.22% (LtV over 80%),

⦁ Bank Pekao SA 8.73 percent. (LtV of up to 80%) and 8.93% (LtV of 80.01%). Since we already know the interest rate on mortgage loans in Poland, it is worth checking the interest rate on mortgage loans in Europe.

Mortgage rates in Europe

If I wanted to briefly answer the question “What is the interest rate on a mortgage in Europe?” , it would be enough for me to write that it is lower on average than in Poland or (which would sound much worse) we have the most expensive mortgages in Europe.

What is the interest rate on loans in Europe? According to information provided by the European Central Bank (ECB), the average mortgage interest rate in Europe ranged from 1.70% (France) to 8.88%. (Hungary). In eurozone countries, the interest rate did not exceed 3.90 percent. (This was the average interest rate in Latvia).

What is the interest rate on a mortgage in different European countries? You can see that in the photo.

Why are mortgage loans in Europe less than Poland?

Mortgage rates depend on two factors: the level of central bank interest rates and whether interest is carried at a floating or fixed rate.

In the eurozone, interest rates are set by the European Central Bank. From November 2, 2022, the ECB refinancing rate is 2%.. For comparison, the reference rate of the Polish National Bank (which also affects the WIBOR rate) is 6.75 percent

One might ask why, then, the average mortgage rate in Bulgaria, which is not in the Eurozone, is so low.? This is because the base interest rate of the Bulgarian National Bank in October 2022 was only 0.49 percent, and in September 0 percent.

On the other hand, the Czechs, like the Poles, face high inflation rates. The main interest rate of the Czech National Bank is 7%. In Hungary, inflation is higher than in Poland (21.1% in October), the main interest rate is 13%, and the three-month BUBOR (equivalent to our WIBOR) is 15.32%. So why are average “mortgage” interest rates down there? This is due to the second factor mentioned: the type of interest rate.

According to European Mortgage Union data, in the second quarter of 2022, only 0.6 percent of mortgages were subject to variable interest rates in Hungary. credits. The percentage of short-term fixed-income loans (from 1 to 5 years) was 15.9 percent. At a medium-term fixed rate (more than 5 to 10 years) – 31.9 percent, and at a long-term rate (more than 10 years) – 51.7 percent.

The cheapest and most expensive mortgages in Europe

The spread of mortgage rates in European countries in September 2022 ranged between 1.70 percent. annually (in France) to 8.88 percent. (in Hungary) and 9.07 percent. (in Poland). I checked the interest rates on loans in Europe in 2022 and which one (fixed or variable) is more popular with customers.

What is the mortgage rate in Germany?

The average mortgage rate in Germany is 3.06%. every year. In our western neighbor, fixed rate mortgages are the most popular. In the second quarter of 2022, their share was 90.4 percent. The most popular were loans with a fixed interest rate valid for more than 10 years (their share was 44.7%).

Mortgage rates in the Czech Republic

According to European Central Bank data, the average interest rate on mortgage loans was 6.12% in September 2022. Every year. Only 1.7% decided to borrow at variable interest. Client. The remaining 98.3 percent were fixed-rate loans. Of this number, 55 percent are short-term fixed-rate loans (from 1 to 5 years), and the remaining 43.3% are medium-term fixed-rate loans (more than 5 to 10 years).

Mortgage rates in Spain

Spain is a country that, in terms of interest rates on mortgage loans, occupies one of the leading places in the ranking. In September 2022, the average interest rate there was just 2.22 percent. annually. In the Iberian Peninsula country, the largest share (65.3 percent) is owned by loans with a long-term interest rate (that is, valid for more than 10 years). The share of fixed rate financing applicable from 1 to 5 years and over 5 to 10 years is 14.7%. Relatively high – 20 percent. – Variable interest rate loans have market share.

Mortgage rates in Sweden

The European Central Bank does not provide data on interest rates on mortgage loans granted by Swedish banks. I will use the information published by the European Mortgage Association. According to them, floating interest rates in the first quarter of 2022 increased to 2.4 percent. Fixed interest rates have also been affected by growth. In the second quarter, the rate applicable for 1 to 5 years increased to 3.3 percent, and for more than 5 years – to 3.5 percent. Interestingly, Swedes more often choose loans with a variable interest rate (their share is 61.3 percent) than those with a fixed interest rate. If they decide on this option, they tend to choose those with a fixed rate that lasts from 1 to 5 years (share of 28.7%) rather than those with a medium and long-term fixed rate (their total share of 38.7%)..

Mortgage interest rate in Poland

We all probably know that things don’t go well in the “mortgage backyard”. The interest rate on loans granted in zlotys (the zloty has no opportunity to obtain financing in euros or Swiss francs) exceeds 9%. every year. And not only those with a fixed interest rate based on WIBOR rates, but also those with a fixed interest rate. Polish banks have been offering partially fixed-rate loans since July 2021.

At first, their share in sales was not very large. However, in the second quarter of 2022 (according to data from the European Mortgage Association), it is already 68.7 percent, and loans at a variable rate: 31.3 percent. It should be noted that in the first quarter of this year, the percentages were almost the opposite (25.6% and 74.4%, respectively). From the end of July this year, customers who pay loans in zlotys can take advantage of statutory credit holidays, and recently the District Court of Katowice removed the WIBOR rate from the loan agreement for the duration of the proceedings (you can read more about it in the article “A groundbreaking judgment was made. Done Remove WIBOR from the agreement. What does this mean for borrowers?”).

What is the UK mortgage rate?

According to information provided by the British service Moneyfacts, as a result of the Bank of England’s decision in November to raise interest rates by 0.75 p. (up to 3%), as the interest rate on mortgages. The interest rate on fixed-rate mortgages was 6.35 percent. (2-year interest rate) and 6.12 percent. (interest rate for 5 years). A few days ago, the five-year average fixed interest rate fell below 6 percent. (It is 5.95 percent per annum).

Why is a mortgage so expensive?

The price of a variable rate mortgage loan depends, among other things, on: From interest rates set by central banks. Its increase leads to an increase in market prices, and, accordingly, to a rise in premiums for liabilities paid by bank customers. Currently, the NBP reference rate is 6.75 percent, and the three- and six-month WIBOR are 7.31 percent, respectively. and 7.50 percent. It should be noted here that despite the fact that the Monetary Policy Board in October and November 2022 did not raise interest rates, the WIBOR rate is still rising.

Right now, there are no indications that subprime borrowers will pay lower premiums. The light at the end of the tunnel may be the new reference rate (WIRON), which will replace the currently used WIBOR. Banks will be required to use them to calculate interest rates on home loans only from 2024, and from January 2023 they will be able to offer loans with interest rates based on WIBOR and WIRON rates. However, for the time being, most banks refrain from answering the question of whether and when to offer interest loans at the new rate.

Some exemptions for borrowers are legal credit holidays. It makes it possible to put on hold the payment of up to eight monthly installments of the obligation (four installments in 2022 and four installments in 2023). If the suspended installments are used to pay the loan too much, we can – depending on their value – reduce the debt by at least several thousand zlotys and pay lower installmentsor shorten the loan period and reduce the amount of interest that we will pay to the bank.

Until recently, the remedy for high premiums was to refinance the loan, that is, to transfer it to another bank. I deliberately used the past tense here. Refinancing is combined with a credit check, and when analyzing it, the bank is obliged to use a so-called credit check. Precautionary buffer, that is, checking whether the client will be able to repay the loan if the interest rate increases by at least 5 points. The situation is similar in the case of changing the variable interest rate to a fixed one – when checking creditworthiness, the bank will also apply a precautionary reserve and it may turn out that the applicant is not creditworthy.

Maciej Kazimierski – Expert of the financial comparison site

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