When taking a long-term loan to purchase real estate, you must take into account the risks that during this time the premiums may increase significantly, the price and value of the property will decrease, as well as changes in the labor market that will lead to a decrease in income – warns the Office of Competition and Consumer Protection in a statement Journalist.
- High inflation brings us closer to raising interest rates
- UOKiK warns of increased mortgage loan payments
- The office also assessed that apartment prices are currently rising like never before, in Warsaw and other large cities
- He assures that this situation will not last forever
- More such information can be found on the home page of Onet.pl
Yukic noted on Wednesday that many people are considering buying an apartment with a loan due to the high property prices since the end of 2019. However, he cautioned against this. Over several decades of loan repayment, there may be significant fluctuations in interest rates that affect Amount of loan installments paidOr the increase or decrease in the prices or values of real estate. He also drew attention to changes in the labor market that may affect the borrower’s income.
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Referring to the BaRN housing price databases of the National Bank of Poland, the office estimated that apartment prices are currently rising like never before, in Warsaw and other large cities. “However, we must remember that this situation will not last forever. And the faster and higher the price increase, the sharper and deeper the decline. A similar phenomenon occurred in the past – after the sharp increase in real estate prices in 2005-2008, there was a long-term decline in real estate prices in 2008-2012 “- warned UOKiK in a press release.
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As pointed out by UOKiK It is also possible to increase the interest rate on loans, which leads to an increase in loan installments. As noted in the statement, the vast majority of mortgage loans are based on a variable interest rate, which means that along with a change in interest rates, the loan installment amount also changes.. At the same time, interest rates are at record low levels at the moment. Reference price WIBOR 3M 0.1% (as of August 25, 2021) and has remained at this level since May 2020. For comparison, in March 2015 it was 1.5%, and in 2012 – 4.91%. The Bureau considers that the risk of an increase in the WIBOR 3M reference rate is “extremely high”.
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The ad also provides an example of the mortgage loan installment amount for different WIBOR 3M values, with the following assumptions: straight installment, 300k loan. PLN, loan term 25 years, 2.75 percent bank margin. At the current WIBOR 3M rate of 0.21%, the monthly installment for this loan will be PLN 1,416.40. However, with the WIBOR 3M rate of 5%, which rates were similar in 2012, the premium is 2,265.99 PLN.
As UOKiK noted in the announcement that In the case of mortgage-secured loans at a variable interest rate, the bank must provide simulations of loan costs for different levels of the reference rate., including. 3 percent, 5 percent and 10 percent and for the current loan interest rate increased by 4 percentage points.
As mentioned Interest is not the only cost of a loan and lower interest does not always mean a better loan. He drew attention to the terms and conditions contained in the contract under which the loan was granted: how the bank will change the interest rate in the event of a change in interest rates, whether the bank will ask for a special contribution and in what amount, what is the margin and other additional costs, and what are the conditions for early repayment for loan? – Will the bank charge a commission on this account, if and what steps the bank will be able to take in the event of a decrease in the value of the property.
The office confirmed it The bank may keep the commission only if the mortgage loan is repaid in whole or in part within 36 months from the date of the contract.
“During the term of the loan agreement, banks constantly analyze prices in the real estate market and the relationship between the outstanding loan amount and the value of the apartment or house that is a guarantee for it. This is determined by the LTV – the loan-to-value ratio. What steps can the bank take if The maximum permissible value exceeded 100 percent. – The head of the office, Thomas Crostiny, indicated in the announcement.
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