Polish Financial Supervision Authority Updates Recommendation S for Mortgage-Secured Credit Exposures

Title: Polish Financial Supervision Authority Amends Recommendation S to Boost Creditworthiness and Government Support for Housing Loans

Introduction:
The Polish Financial Supervision Authority (KNF) has recently made significant changes to Recommendation S, which focuses on good practices in managing mortgage-secured credit exposures. These changes aim to enhance creditworthiness and include the government’s support program for housing loans. The amendments have been welcomed by experts and government officials, as they are expected to benefit individuals seeking their first apartment or single-family house.

Increased Creditworthiness with Secure Credit 2%:
Jarosław Sadowski from Expander has conducted calculations that reveal the available amount of Safe Credit 2% will be approximately 31% higher than that of a regular loan with a fixed interest rate and installment. For instance, if someone can currently obtain a 300,000 PLN ordinary mortgage loan, the available loan amount with a subsidy will be around 394,000 PLN. Similarly, if someone can secure a 400,000 PLN loan, they can expect to receive approximately 526,000 PLN as part of the Secure Credit 2% program. This increase in creditworthiness is made possible by subsidies that significantly reduce installments. The KNF has agreed that banks should consider installments less subsidies when calculating the available loan amount.

New Recommendation and Improved Accessibility:
The head of the Ministry of Development and Technology, Waldemar Buda, has emphasized that the changes introduced by the Polish Financial Supervision Authority are exceptional and excellent news for individuals seeking government support. The new recommendation applies to all banks participating in the program and primarily defines the method of calculating creditworthiness. Buda further explained that the creditworthiness of people applying for their first apartment or single-family house will be improved, and banks will assess loan applicants with a government subsidy more favorably. This means that a loan with government support will be even more accessible than a regular mortgage.

Own Contribution and Property Valuation:
The published changes waive the principle of recommending banks to demand an own contribution and not credit the full value of the property constituting the collateral. This applies to loans granted as part of the bank’s participation in the government program related to offering guarantees for mortgage loans without an own contribution. The Polish Financial Supervision Authority also provides guidelines for calculating the interest rate buffer, considering changes in the interest rate level when assessing the risk of mortgage-secured credit exposures. However, in cases where a guaranteed housing loan is granted by the bank, the bank should demand an own contribution from the borrower and not credit the full value of the real estate constituting the collateral.

Safe Credit 2% Program:
Starting from July 1, the government’s Safe Credit 2% program will be implemented. This program offers subsidies for loans used to purchase the first apartment or house. The secure loan amount cannot exceed 500,000 PLN, or 600,000 PLN for borrowers running a household with a spouse or having at least one child. The own contribution cannot exceed 200,000 PLN. In the absence of an own contribution or incomplete contribution, borrowers can utilize the guarantee of Bank Gospodarstwa Krajowego. The subsidy for installments will be provided for ten years, and the loan will be repaid through fixed capital installments. During the subsidy period, the loan interest rate will be 2% for the borrower, plus a margin, commission, and other bank charges.

Conclusion:
The recent amendments to Recommendation S by the Polish Financial Supervision Authority have introduced significant changes to enhance creditworthiness and include government support for housing loans. These changes are expected to benefit individuals seeking their first apartment or single-family house by making loans more accessible and increasing the available loan amount. The Polish Financial Supervision Authority expects banks and credit institutions to adapt their activities to these changes by July 1, 2024.

the role of banks in the economy

Art of the government support program for housing loans. Previously, banks were required to demand an own contribution from borrowers, which often acted as a barrier for individuals who may not have had the necessary savings. With the amendment to Recommendation S, banks will now be able to credit the full value of the property as collateral without requiring an own contribution. This change aims to make housing loans more accessible for individuals who may not have a significant amount of savings.

Positive Impact on the Housing Market:

The amendments to Recommendation S are expected to have a positive impact on the housing market in Poland. By increasing creditworthiness and improving accessibility for individuals seeking their first apartment or single-family house, more people will be able to afford and enter the housing market. This, in turn, can stimulate demand and contribute to the growth of the real estate sector.

Potential Benefits for Borrowers:

The changes made by the Polish Financial Supervision Authority, in collaboration with the government’s support program for housing loans, offer potential benefits for borrowers. The increased creditworthiness through the Secure Credit 2% program can provide borrowers with higher loan amounts that may better suit their housing needs. Additionally, the removal of the requirement for an own contribution can alleviate financial burdens for individuals who may not have significant savings or resources.

Overall, the amendments to Recommendation S by the Polish Financial Supervision Authority aim to boost creditworthiness and government support for housing loans. The changes include increased credit amounts through the Secure Credit 2% program and the removal of the own contribution requirement. These changes are expected to enhance accessibility to housing loans for individuals seeking their first apartment or single-family house. The positive impact on the housing market and potential benefits for borrowers make these amendments a significant development in the financial landscape of Poland.