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Office of Competition and Consumer Protection

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Floating or fixed rate mortgage loan? Calculate and don't miscalculate

< previous | next > 23.09.2021

Floating or fixed rate mortgage loan? Calculate and don't miscalculate
  • Are you planning to take a loan to purchase a house, but you fear that the installment rates will rise?
  • As a part of the campaign "Calculate and don't miscalculate!",  the President of UOKiK recalls that banks should also offer fixed rate loans.
  • Such a loan is slightly more expensive, but you are guaranteed a fixed installment rate.  

Growing interest in house purchases from late 2019 directly translates into increased interest in mortgage loans. In the second quarter of 2021, there was further growth in the number of loans granted – the AMRON-SARFiN report estimates this growth at 17 percent when compared to the first quarter of the year.[1] In July, banks granted loans with a significant vaue of PLN 8.1 billion. Interest rates at a record low give the borrowers reason to be optimistic because of lower loan installments. At the same time, they are a cause for concern because of the high probability that they will increase in the future. Are borrowers doomed to this uncertainty? In many cases, the solution is a fixed rate loan.

Since 2018, UOKiK has encouraged financial market participants to offer and promote fixed rate loans to customers. Such a loan is safer not only for the consumer but also for the bank.

A financial commitment with an equal fixed interest rate, allows the customer to always pay the same instalment rate regardless of changes in NBP reference rates and WIBOR market rates. - A fixed rate mortgage contract very clearly defines the obligations of both parties, and allows the consumer to better plan their future spending and savings. Moreover, it protects the customer from double market shocks, such as simultaneous increase in loan instalments and decrease in income - the President of UOKiK, Tomasz Chróstny points out.

From a bank's perspective, a fixed rate loan also ensures greater business predictability, as well as much smaller legal and reputational risk in the event of potential disputes with customers and market supervisors.

It should also be noted that, according to recommendation S of the Financial Supervision Authority, banks are required to offer fixed-rate mortgage loans. They are also encouraged to set a target share of fixed rate loans in total sales and to offer existing customers to convert their floating rate loans to fixed rate loans.

Currently, loans with a periodic fixed interest rate are offered on the Polish market. The interest rate on such loans is fixed for the first five or ten years, and then may be renewed under new terms for additional five or ten-year periods.

- I hope that in the future banks will also start to grant loans with fixed interest rate over the entire loan term, as is the case in other EU countries, e.g. Germany and France – says the President of UOKiK, Tomasz Chróstny. - It is also worth mentioning that in several European countries, such as the aforementioned Germany, but also the Netherlands, Belgium and Switzerland, periodic fixed rate and fixed rate loans account for more than half of all mortgage loans granted.

When interest rates are low, fixed rate loans tend to be more expensive than floating rate loans, but may prove to be a small price to pay for the peace of mind in the future. Moreover, the more popular product a fixed rate loan becomes, the lower the price we can expect, due to competition and cost efficiency. Popularising fixed rate credit is therefore in everyone's interest: banks, consumers and financial market supervisors.

"Calculate and don't miscalculate" campaign of the President of the Office of Competition and Consumer Protection

As part of the campaign "Calculate and don't miscalculate!" UOKiK prepared two 30-second video spots for TV and radio. They warn of the real loss of invested funds and point out the inability to repay the loan if interest rates rise. These video spots are available on public television and radio from 6 September. They are broadcast at no cost, pursuant to Art. 31(c) of the Act on Competition and Consumer Protection.

"I encourage the media, institutions and NGOs to join the campaign. Any form of support for the campaign will help us reach a wider audience and improve consumer safety," says Tomasz Chróstny, the President of the Office of Competition and Consumer Protection.

The "Calculate and don't miscalculate!" campaign video spots and other downloadable content are available on the UOKiK website.

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[1] https://www.zbp.pl/raporty-i-publikacje/raporty-cykliczne/raport-amron-sarfin

Consumer assistance:

Tel: 801 440 220 or 22 290 89 16 – consumer helpline
E-mail: [SCODE]cG9yYWR5QGRsYWtvbnN1bWVudG93LnBs[ECODE]
Consumer right advisers – in your town or district

Additional information for the media:

UOKiK Press Office
Pl. Powstańców Warszawy 1, 00-950 Warszawa, Poland
Phone +48 695 902 088, +48 22 55 60 246
E-mail: [SCODE]Yml1cm9wcmFzb3dlQHVva2lrLmdvdi5wbA==[ECODE]
Twitter: @UOKiKgovPL

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