- The fall in the value of mortgage applications is the largest in 13 years
- The number of applications in April this year is one of the lowest in recent years
- The average expected loan value also begins to decline
- The reasons for the deteriorating situation are higher interest rates and stricter regulations
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The home loan demand index, calculated by the Credit Information Bureau, fell 38.8% in April. Every year. This is the biggest drop since April 2009. The main reason for the fall in the index is the drop in the number of people applying for a mortgage. In April this year, only 28.42 thousand were submitted. requests compared to 51.58 thousand. a year earlier, which means a drop of 44.9%. Compared to March 2022 (which was almost a peak year and resulted in an unprecedented monthly increase in applications from February of 75%), there were up to 46.8% fewer applications in April .
April’s number of mortgage applicants (28.42 thousand) is one of the worst readings in the last decade, is only slightly higher than that of April 2020 marked by the pandemic (27.8 thousand). The average value of the home loan applied for is also starting to drop. In April, it amounted to 353.95 thousand. PLN and was 3.2 percent. lower than in March, when it was the highest in history (365.7 thousand PLN). Compared to April 2021, the average amount increased by 5.7%.
– As I announced in my previous comment, the forecast for the April reading of the index of demand for housing loans has come true – says prof. Waldemar Rogowski, chief analyst of BIK. He adds that the explanation for the anomaly in March, i.e. the exceptionally large increase in the number of loan applications, due to the new, stricter requirements of the Polish Financial Supervisory Authority, was appropriate. .
Recall that at the beginning of March, the KNF announced that it would increase the requirements for calculating solvency. The new regulations were due to come into effect in April, so Poles turned out in droves in March to submit their applications, wanting to catch the less demanding old regulations. This boosted the March result.
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– The current reading of the index points to a significant slowdown in the mortgage market over the next few quarters. The April value of the Index is the lowest since April 2009, ie for 13 years, when the reference rate was 3.75%. The April value was negatively influenced by two factors that shape it: the lower number of applicants compared to a year ago and the slowdown in the growth of the value of the home loan applied for – explains prof. Rogowski.
According to him, the weakness of the market and the decline in the value of the expected loan are the cumulative and multiplied effects of the rise in interest rates and the increased regulatory requirements for credit testing. – As you can see, such a combination is an electrifying mix for applying for a home loan.“. I warned of such a negative scenario, that is, a drop in the number of applicants, accompanied by a decrease in the average value of the requested loan, last year – says the expert BIK.
– It therefore appears that the current mix of negative factors is having a greater impact on the home loan market than the uncertainty of the early months of the pandemic. The value of mortgage demand in the coming months will be mainly influenced by monetary policy. Further tightening and an increase in interest rates will further reduce the creditworthiness of potential borrowers, and therefore significantly weaken the demand for housing loans – adds prof. Rogowski.