Inflation in Poland: “credit holiday” due to high interest rates

Inflation in Poland: "credit holiday" due to high interest rates

Status: 05/31/2022 03:48 AM

Since loan interest rates in Poland are mostly variable, the high inflation rate causes many borrowers to suddenly pay several higher monthly installments. The government wants to remedy the situation – with a “credit holiday”.

by David Zajonz, ARD Studio Warsaw

To dream of your own apartment or house – in Poland it threatens to become a nightmare. Elisja of Warsaw talks about a loan he and his partner had taken out two years ago: “At first calculation, the monthly rate should have been 1,300 to 1,500 zloty. Now it will be 2,500 zloty,” Elisja told a Polish radio station. tells to. “It’s a huge loss for us.”

Convertible loans are becoming a problem

Monthly installments that almost double are currently not uncommon in Poland. Reason: Loans are usually given with a variable interest rate – without a fixed guaranteed interest rate. It was attractive in times of low interest rates, money was cheap. Due to rising inflation, the Polish central bank has now raised the key interest rate to more than five percent. Convertible loans become boomerangs.

“We have had a credit boom in recent years,” explains financial expert Jaroslav Sadowski. “With new loans, the monthly installments are mostly interest payments, not so much repayment. When interest rates rise sharply, it has a huge impact on monthly installments.”

Government sees need for action

So rising credit rates are a big topic among the Polish population. The government promises to retaliate. Because the financial stability of Polish families is at risk, says Prime Minister Mateusz Morawiecki. The head of government said, “The loan should mean the opportunity for many families to get a house, but it has become a burden that is beyond their own strength.”

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So the government intends to take two major measures. The existing hardship fund for needy borrowers is to be increased. Banks pay in funds. The government is also planning a so-called “credit holiday”. This should allow borrowers to temporarily suspend their payments and thus extend the term of their loans. Introducing the plans two weeks ago, Moraviki said, “Everyone will be able to take advantage of eight months of ‘credit holidays’ without additional terms or fees.”

Limited to economically weaker families?

On the other hand, Polish banks are showing a lot of resistance. They fear the burden of billions and call for the “credit holiday” to be limited to economically weaker families. Financial analyst Sadowski, whose consulting firm has borrowers as clients, also sees the regulation can be used by the wealthy. Overall, however, the state intervention is understandable: “If we allow many people to be unable to repay their loans because of high interest rates, it could result in a crisis. In my opinion, that’s too dangerous.” Will happen.”

Moreover, argues the financial expert, banks have made huge profits recently. Although they have sharply increased lending rates, there has been hardly any increase in savings rates on deposits.

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