On 26th of June ING Bank started offering variable-rate mortgages based on WIRON. More information about WIRON you will find here: WIRON – the new base rate for mortgages in Poland
In Poland variable-rate mortgage interest rate is calculated this way:
Interest Rate = base rate + bank’s margin
Bank’s margin is fixed, base rate is variable. So your mortgage interest rate moves automatically in line with the base rate. WIBOR 3M or WIBOR 6M is the base rate for mortgages at most banks in Poland. At ING the base rate is WIRON 1M.
At the time of writing:
- WIBOR 3M is 6.90%
- WIBOR 6M is 6.95%
- WIRON 1M is 5.93%
Theoretically your mortgage interest rate should be around 1% lower at ING than at other banks. But everything depends on a margin. When ING used WIBOR as a base rate a margin was around 1.65% – 1.85%. Now a margin is 2.39% or 2.34%.
How does it look compering to other banks’ offers? This is an example:
Banks will have to replace WIBOR by WIRON in the existing mortgages to the end of 2024. Citi has much lower margin than ING and in the long term it would be better to choose a bank with a lower margin because in 1,5 year from now the margin will be added to WIRON. Theoretically in the long term your total interest would be lower at Citi than at ING. But you need to remember that 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.