In Poland variable-rate mortgage interest rate is calculated according to this formula:
Interest Rate = base rate + bank’s margin
Bank’s margin is fixed but the base rate is variable. So your mortgage interest rate moves automatically in line with the base rate. The base rate for mortgages at most banks in Poland is WIBOR 3M or WIBOR 6M. This means that the mortgage interest rate can change every three or six months.
From 2023 banks in Poland can offer mortgages with WIRON as a base rate. Banks will have to replace WIBOR by WIRON in the new offers and in the existing mortgages to the end of 2024.
What is WIBOR?
WIBOR (Warsaw Interbank Offer Rate) is an interest rate at which banks in Poland lend to one another. WIBOR is calculated based on submissions provided by a panel of banks to reflect the interest rate at which banks could borrow money in the wholesale markets, it is not based on actual transactions.
What is WIRON?
WIRON (Warsaw Interest Rate Overnight) is an interest rate calculated based on the actual transactions and reflect the average of the interest rates that banks pay to borrow overnight from other banks, financial institutions and large companies. WIRON is calculated and published by GPW Benchmark. The index is published daily on the website: https://gpwbenchmark.pl/wartosci_i_statystyki
At the time of writing:
- WIBOR 3M is 6.90%
- WIBOR 6M is 6.95%
- WIRON 1M is 5.95%
Let’s look at the comparison of WIBOR and WIRON in the past:
Source: Deutsche Bank, GPW Benchmark
Theoretically an interest rate for new mortgages in Poland should be lower thanks to WIRON. But probably banks will use a higher margin than now. The good example is ING Bank which as a first bank in Poland started offering mortgages based on WIRON. When ING used WIBOR as a base rate a margin was around 1.65% – 1.85%. When they started with WIRON the margin is 2.34% or 2.39%. Let’s look here: First variable-rate mortgage in Poland based on WIRON
What about the existing mortgages based on WIBOR?
Banks will have to replace WIBOR by WIRON in the existing mortgages to the end of 2024. But it won’t be a simple switch from WIBOR to WIRON. Banks will switch from WIBOR to WIRON by using an adjustment spread – the point is to keep your mortgage interest rate at the same (or similar) level.
The Adjustment Spread is the term used for the adjustment between WIBOR and WIRON to reduce or eliminate the economic value transfer between the lender and the borrower when the index changes from WIBOR to the replacement WIRON.