From the new year, we will have changes in mortgage banks. Thanks to them, more units should be created specializing in granting mortgage loans.
The mortgage bank market in Poland is just beginning, and the reason for this was legal and tax barriers. However, from January 1, 2016, in connection with the amendment to the provisions introduced by the Act of July 24, 2015 amending the Act on mortgage bonds and mortgage banks and some other acts, some of the barriers will be removed, which will popularize and consequently make the offered mortgage loans more attractive mortgage.
Differences between banks
The main difference between a universal bank and a mortgage bank is the fact that the mortgage bank is specialized in granting mortgage loans for residential and industrial construction purposes, and the loan action is financed mostly from the issue of so-called covered bonds, not deposits. These are debt instruments, reminiscent of long-term bonds in their construction. The basis for their issue and security are the mortgage bank’s claims, the source of which are the mortgage loans it has granted. In this way, mortgage banks are guaranteed long-term and therefore safe refinancing, which means for customers that fixed rate mortgages will be available.
Therefore, for customers it means protection against the risk of jumps in rates. The client would gain peace of mind, i.e. a fixed installment, for about 5-7 years, because mortgage bonds are usually issued for this period. It is worth adding that currently all mortgage loans in Poland are based on a variable rate, and the interest rate usually changes every quarter.
What’s next? – It depends on the market situation. If the cost of financing on the bank’s side increases, the loan may become more expensive. Let us add that in the West, banks are fighting for customers who end their mortgage repayment period at a fixed rate for several years, offering them to transfer the loan on better terms. It can be similar in Poland. Mortgage bank loans can also be cheaper because mortgage bonds are a cheaper source of financing than unsecured bonds – the difference may reach even over 1%. Theoretically, the bank could offer a loan with a lower margin.
Problems with developers
However, at present, the mortgage bank’s offer to the universal bank in terms of financial conditions is not significantly different. Of course, the biggest problem is the issue of legal collateral (the so-called mortgage on the next premises). Until January 1, 2016, the developer is required to agree to establish an entry on the parent KW regarding the establishment of a mortgage on the premises, which will be separated to secure the buyer’s credit agreement. After this date, the amendment will come into force, in which it is introduced in art. 20 clause 6, which reads: “Application for entry of a claim referred to in para. 5 may be submitted by the owner of the property on which the construction project is being carried out, a mortgage bank or the buyer of the housing property referred to in para. 5. Entering a claim in the land and mortgage register does not require the consent of the owner of the property on which the construction project is being carried out. ”
However, despite the changes, most developers have many fears that this type of collateral on the land and mortgage register and entering hundreds of mortgages of future buyers of premises is treated as a potential threat to the final unloading of the premises and many legal doubts arise, e.g. what if the original the buyer resigns from the premises, and subsequent steps appear on the developer’s side to delete such an entry in the parent KW. It should be remembered that art. 20 clause 5 of the Mortgage Bonds Act, indicates that the deletion of a claim from the land and mortgage register requires the consent of the mortgage bank for which the mortgage is to be established, which is known to involve legal formalism and time.
In connection with the above principles of establishing and deleting a mortgage, it effectively discourages developers from favoring a mortgage bank – they often suggest a universal bank to the buyer. Nevertheless, it should be expected that when a competitive offer of mortgage banks appears, customers will pay more attention to it.