A mortgage without a down payment is one of the flagship points of the Polish Deal, the ruling party’s political and economic program to revolutionize Poles’ access to their own homes. The snag is that making a commitment for 100 percent of the property’s value when interest rates are rising significantly could be a shot in the knee. However, let’s find out exactly what an apartment without an own contribution implies, when the banks will launch their offers and who the BGK guarantees are aimed at.
The Polish Deal and the no-contribution apartment
We first heard about the no-contribution apartment in early 2021. That was when Prime Minister Mateusz Morawiecki, along with other Law and Justice politicians, launched a media campaign promoting the Polish Deal. After the entire United Right announced the assumptions of the program, many Poles impatiently began to search for offers of loans without a downpayment, but we had to wait until November 2021 to publish the law.
That’s when the program was signed by the president, and most of the tax changes included in the law went into effect at the beginning of 2022. However, you still have to wait for the no-down-payment mortgage, as we’ll discuss in a moment.
Non-contributory mortgage – assumptions
The basic premise of the no-contribution housing, or more precisely the guarantee of the Bank of National Economy, which is supposed to vouch for borrowers that they will repay the contribution required by banks along with the loan installments, is to make it easier for young families to buy their own four corners.
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This is because the ruling party has come to the conclusion that the 20% own contribution required by the Financial Supervision Commission may be too much of a burden for many Poles, and access to mortgages should be made easier for them. It is worth noting that the Polish Deal, and therefore the “apartment without own contribution,” was being proceeded with at a time when interest rates, and thus loan interest rates, were at historically low levels, which was also likely to contribute to the program’s success. The lower the interest rate on loans, the greater the creditworthiness and naturally the greater the interest in loans.
Read also: What is a reverse mortgage and is it worth opting for this solution?
At the moment, unfortunately, even before the banks’ first offers, the National Bank of Poland, fighting inflation, is raising interest rates at a rate not seen in Poland for more than a dozen years. This, in turn, discourages Poles from taking on new debt, and analysts already estimate that at the end of the year interest rates could be as high as they were a decade ago, around 4.5 percent.
Apartment without own contribution – who can count on BGK guarantees?
The loan without own contribution is aimed primarily at families, i.e. married couples with a minimum of one child or single people with at least one child. Importantly, only people aged 20-40 will be able to apply for a loan with a guarantee from the Bank of National Economy. This is because, as we mentioned earlier, the government has set its sights on “young people.”
In order to be able to apply for a mortgage without a downpayment, one must not own the right to any residential property. The program is to go only to those Poles who do not own their own apartment and have to rent it.
A home loan without a down payment can only be granted to a creditworthy person, which is pretty much the same as for any bank loan. The snag is that with each decision of the Monetary Policy Council to raise interest rates, this ability declines sharply. Experts estimate that in the space of 5 months alone, when the MPC raised interest rates 5 times from 0.1 to 2.75 percent, the statistical Kowalski lost about 130 thousand in creditworthiness.
Credit without contribution – what can you get?
A mortgage loan without a down payment can be granted only for an apartment from the secondary or primary market or for the construction of a house. The law does not provide for the possibility of granting a guarantee to a person wishing to purchase a house or property other than an apartment.
Importantly, those in power have determined the maximum value of one square meter of housing that will be subject to credit with a BGK guarantee, which significantly limits the number of properties that will “catch on” for loans without an own contribution.
Thus, mainly apartments located in large cities will fall out, and if we take into account the average market price of one meter and the maximum amount of the guarantee – 100 thousand zlotys – borrowers will be able to count more or less on apartments of 45 sqm.
When will non-contributory loans be available?
As we wrote in the introduction, the law on the Polish Laden was signed by the President in November 2021. The tax changes and most of the other “reforms” included in the Law and Justice program went into effect at the beginning of this year. However, a so-called “transition period” was applied to non-contributory loans, which is exactly six months from the date of publication of the law in the Official Gazette.
This means that the first offers of non-contributory loans in commercial banks will appear no earlier than May/June 2022. However, it is not known which banks will offer loans with the BGK guarantee – everything depends solely on whether the institution is willing to participate in the ruling party’s program.
