A U-turn on Loan Installments. There is a long-awaited decision by the Monetary Policy Council

The reference rate fell by 50 basis points from 5.75 percent to 5.25 percent, the National Bank of Poland announced in a statement after the meeting ended on Wednesday. The MPC's decision is good news for borrowers, who can count on a reduction in loan installments of up to PLN 200 per month.

The central bank said the rediscount rate was cut to 5.30 percent from 5.80 percent on an annual basis, while the bill discount rate fell to 5.35 percent from 5.85 percent. The Lombard rate was cut to 5.75 percent from 6.25 percent, and the deposit rate fell to 4.75 percent.

The MPC resolution comes into force on 8 May this year. The Council has maintained the previous level of interest rates since October 2023.

The Monetary Policy Council announced its decision on interest rates on Wednesday afternoon . The Council's decision came as no surprise to economists and commentators who had expected a rate cut.

Taking into account the incoming information, including lower current and forecasted inflation, lower wage growth and weaker data on economic conditions, the Council assessed it was justified to adjust the level of NBP interest rates.

The Monetary Policy Council stressed that its further decisions would depend on incoming information "concerning the outlook for inflation and economic activity".

"The uncertainty factor remains the development of demand pressure and the situation on the labor market in the coming quarters, the level of administered prices of energy carriers and further actions in the area of ​​fiscal policy. Another source of uncertainty is the development of inflation in the world, including due to changes in the trade policy of the main economies," the press release stated.

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Earlier, for a long time, the NBP president argued that, among other things, due to increased inflation, there was no room to change interest rates. He pointed out that in the conditions of the ongoing economic recovery, rapid wage growth and loose fiscal policy, the MPC must conduct monetary policy in such a way as not to allow inflation to persist at an elevated level.

Member of the Monetary Policy Council Ludwik Kotecki spoke in one of the April editions of "Gość Wydarzeń" about whether and when we can expect a reduction in interest rates. Their level affects the amount of installments paid by borrowers. - The question is not "if", but "how much" these increases will be and whether this will be the beginning of a cycle or a one-time adjustment - he said then.

Interest rates directly translate into loan installments. In the final analysis, how much money the borrower must return to the financial institution depends on the individual terms of the agreement, such as interest, fixed or decreasing installments or the loan period. Regardless of these variables, the cost of the loan results from both the bank's margin and the WIBOR rate. And it is this rate that is closely linked to the NBP interest rates.

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WIBOR , in simple terms, indicates how much money costs on the interbank market. Its minimum level is set by the deposit rate, and its maximum by the lombard rate. Usually, WIBOR approaches the reference rate. In the case of mortgage loans, the WIBOR 3M or WIBOR 6M indicator is most often used, which means that in the event of NBP rate cuts, borrowers will not see lower installments immediately, but will have to wait a few months.

According to Xelion analyst Piotr Kuczyński , quoted by the Interia Biznes portal, lower NBP interest rates mean smaller credit councils. As he calculated, mortgage loan installments may fall from several dozen to over a hundred zlotys in the case of debt of PLN 300,000.

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The Chairman of the Committee for Financing and Real Estate at the Polish Bank Association, Jacek Furga, estimates that with a 50 basis point rate cut, the reduction for the borrower with an average loan worth PLN 500,000 would amount to over PLN 200. - This is already a measurable amount of money and I think it would be a big incentive, and each subsequent cut will make the loan even more attractive - he emphasized.

As Jarosław Sadowski, director of the Rankomat.pl analysis department, reports in Interia Biznes: "Such a reduction in interest rates will also slightly improve the availability of mortgage loans. Creditworthiness will increase by about 5 percent. If someone could get a loan for PLN 500,000 at the beginning of April, after the reduction it will be about PLN 525,000"

Prime Minister Donald Tusk commented on the MPC decision immediately after its announcement: "Interest rates finally lowered. Better late than never. It will be easier to get an apartment. Without context," he wrote on his social media account.

On Thursday at 3:00 PM there will be a press conference of the President of the National Bank of Poland, Prof. Adam Glapiński. The economist will comment on the reasons for the MPC decision at a meeting with journalists.