Low installments of loans in USD make all borrowers happy. Interest rates have remained at a record low for 3 years, so some people may have already forgotten that the interest rate on the loan is variable. The low loan installment may change, and the installment increase may be even a dozen or several dozen percent.
From among the interest rates of the National Bank of Poland (NBP)
The most important from the perspective of loan repayments is the reference rate, which has been 1.50 percent since March 2015. It is the level of the Wibor rate and the interest rate of retail loans that indirectly depends on its level. The 3-month rate most frequently used by banks has remained at the level of 1.70-1.73 percent for many months, which measurably translates into the portfolios of borrowers. For example, a person who took out a loan for 30 years in 2008 began repaying the liability with an installment of approximately USD 710 for every 100,000. loan, while today the installment is lower by almost 40 percent. and is about 430 zlotys. Also people who took out loans a few years later also benefit from a lower interest rate. In the case of a loan taken out in September 2013, the installment was reduced by approximately 10%. Four years ago, the first installment was USD 460 per 100,000. debt, and today you should pay about USD 410 every month.
Higher rates, higher installments
Such low interest rates will remain for at least a dozen months. Inflation remains stable below the NBP inflation target, wage pressure is not rising, and the recent zloty appreciation does not support an interest rate increase. Also statements of MPC members indicate that interest rates will not be increased in the near future. In particular, one should pay attention to the statement of the NBP President Adam Glapiński, who after the March MPC meeting said that until 2020 he sees no reason to raise interest rates. However, it is worth being aware today that sooner or later interest rates will rise and loan installments will increase.
Are all borrowers aware of how much the monthly cost of the loan may increase?
The table below shows the simulation of the increase in loan installments for different Wibor rates. The first column shows the installments at the current Wibor rate. In the second column we find the amount of the loan installment when the Wibor rate increases by 1.50 pp to the level of about 3.20 percent. The next column is Wibor in the amount of 5.10 percent, i.e. at the level which was recorded only six years ago, in mid-2012. The last column shows the installments calculated for the Wibor rate from 9 years ago, i.e. at the level of 6.50 percent.
ffer with a fixed interest rate. However, market practice shows that this is only a theoretical safeguard. Today, loans with a fixed interest rate only have 4 banks in their offer, and these are offers that guarantee the client a fixed interest rate for a maximum of 5-7 years. After the end of this period, the fixed rate is re-determined for the next period or the method of determining the interest rate changes and from that moment it is variable, as in the case of other loans. Therefore, there are no offers that guarantee a fixed interest rate for the entire loan period. Although a fixed installment, e.g. for 5 years, provides some financial stability, it does not fully protect against interest rate risk. In addition, when deciding on such an offer, we must reckon with the fact that the loan installment will be higher than the loan installment with a variable interest rate. Also after the end of the fixed interest rate period, the margin for setting a variable rate may be higher than when we decided to use a variable rate from the beginning
Can you protect yourself against the increase in installments?
One of the collateral that a borrower can use today is to choose an oIn recent years, we have mainly observed a decrease in interest rates and, consequently, falling installments of USD loans. Due to variable interest rates, the reduction in interest rates had a positive effect on borrowers’ portfolios. However, in the next few years you need to prepare for a reversal of this phenomenon. An increase in interest rates, regardless of the scale of the increases, will have a negative impact on household finances this time. It is worth being aware of this phenomenon and thoroughly analyzing all risks and your options when we decide to take a loan. It should be remembered that the low installment we pay today will not apply until the end of loan repayment and we will have to face higher monthly fees.