Low interest rates are a reason for all borrowers to be satisfied. As a result, the cost of servicing the loan has been significantly reduced. However, nothing lasts forever and low installments may increase in the future. As a result of an increase in interest rates, the PLN loan installment may increase by up to several dozen percent.
Interest rate cuts in Poland began in 2012, when in November the Monetary Policy Council (MPC) made the first reduction by 25 basis points to 4.50%. For over two years, the Monetary Policy Council reduced rates nine more times, and from March 3 this year the basic rate is 1.50%.
This is a historical minimum and as announced
Further reductions are unlikely to be expected. However, from the borrowers’ point of view, the Wibor rate is more important, since it is the interest rate on loans that depends on it, most often on the 3-month rate. Changes to this rate take place at least a few weeks in advance, discounting previously expected MPC decisions. The last 3-month Wibor recorded its last maximum on July 11, 2012, reaching the level of 5.14%. After many interest rate cuts, currently 3-month Wibor is 1.65%.
Such a low interest rate pleases all borrowers, but everyone should pay attention to a possible increase in interest in the future. What will happen to the loan if interest rates start rising? What scenario should you be prepared for?
Loan repaid for years – a return to the past
People who have been paying back their loans for several years have slightly more experience. Many of these borrowers know and remember what high interest rates mean, at what level installments can be. For example, a person who took out a loan of 300,000 in January 2010 for 30 years initially paid an installment of about PLN 1740. However, in mid-2012, the monthly load increased by more than 10% compared to the initial installment. However, from that moment installments began to decrease. Currently, the loan installment is about PLN 1330 and it is lower by almost 25% compared to the first installment and over 30 percent compared to the highest installment in July 2012.
Changes in the amount of the loan installment – 300,000 loan PLN, margin 1.50, repayment period 30 years, equal installments, loan taken out in January 2010
You take out a loan – remember that the installment may increase
In a completely different situation there are people who are just taking out a loan today. Low interest rates mean low installments. However, are everyone aware of the level to which the installment may rise in the event of interest rate increases and higher vibrancy? We will analyze this scenario using the example of a PLN 300,000 loan for 30 years.
Forecast changes in the installment rate of a new loan – 300,000 loan PLN, margin 1.80, repayment period 30 years, equal installments
As you can see, the increase in monthly installments can be really very big compared to the installments paid today. The loan installment may increase by up to several dozen percent. This is a much larger increase than the increase in loan installments in the Swiss franc, after the so-called “Black Thursday” on January 15, when the Swiss franc strengthened against the zloty by about 25 percent due to the decision of the Helvetians.