There has been an unprecedented situation in the banking world. We have got WIBOR (Warsaw Interbank Offered Rate) – the reference interest rate on loans on the Polish interbank market, at historically lowest levels. This is a direct result of the decisions of the Monetary Policy Council that were made on May 28, 2020 – about which I informed you in an earlier entry. Below is a list of the three most popular values.
WIBORVALUE
WIBOR 1M0,24% (-0,4000)
WIBOR 3M0,28% (-0,4000)
WIBOR 6M0,29% (-0,4000)
WIBOR’s values for 2020-05-29

What does this mean for borrowers?

In the overwhelming majority of cases, mortgage loans, cash loans, operating leases, etc. are based on variable interest, which consists of two components:

The first is the bank’s margin – that is, the fixed value on which the bank generates profits from the capital lent to us.

The second one is WIBOR, most often 3M and 6M (e.g. at ING Bank Śląski and BNP Paribas) and 1M often found in operating leases.

TOTAL NOMINAL INTEREST RATE = MARGIN + WIBOR

Therefore, if in a product based on variable interest rate, WIBOR as one of the components decreases, it will measurably translate into the total interest rate on the liability, and thus – saving on accrued interest on borrowed capital. The longer WIBOR remains at such record low levels, the greater the sum of interest saved, which often in the scale of a loan taken for 30 years can reach spectacular values of the order of several dozen thousand PLN on the whole liability.

When will I feel the installment reduction?

It depends on the content of the contract signed with the given bank. Generally speaking, each borrower has a record in which it is precisely specified with what frequency the bank will update the repayment schedule. The real decrease in the monthly installment (interest) will be felt fastest respectively – persons with leasing based on WIBOR 1M, then the vast majority of borrowers with WIBOR 3M and the longest waiting time will be for persons with products based on WIBOR 6M. However, the latter will most slowly feel the effects of potential increases in the future. The above information is evidently optimistic but also raises the question – how long will this ideal state (from the borrowers’ point of view) last?