In the second quarter of this year, the average Polish family had to allocate even more of their income than 3 months ago for servicing the loan for the purchase of real estate on the primary market. Mortgage Load Index (IOH) prepared by The Prince Hal Credit House reached 37.50% and increased by 1.62 pp. However, the annual situation of the exemplary family improved, because within 12 months the value of IOH decreased by 1.28 ppThe Mortgage Debt Index values are particularly important for people planning to buy real estate and take out a loan.
Readings in the following months show how much of the family’s net income must be allocated to servicing the new loan commitment. It is worth recalling that in accordance with the current Recommendation T of the Polish Financial Supervision Authority “the maximum level of the ratio of expenditure related to servicing credit obligations to the average net income achieved by persons obliged to repay the debt should not be higher than 50% for retail clients with a net income not exceeding the average level remuneration in the economy, in no case should it be higher than 65%. “
What decided about the changes?
In the period from April to June, the growth of the Mortgage Load Index calculated for the 7 largest Polish agglomerations was determined by two factors. It was mainly due to the increase in interest rates on loans resulting from both higher margins and the increase in the interest rate on Wibor. The average interest rate for the analyzed example in the second quarter of this year increased by 0.25 pp to 6.75 percent. Higher IOH readings were also affected by higher bid prices per square meter of real estate purchased. These unfavorable increases were not sufficiently offset by positive changes in the factor determining the value of the Index in this case. The average gross salary in the enterprise sector for selected voivodships increased by only 0.28 percent during this time.
Despite the increase in IOH in the second quarter, it is worth noting that the Index values decreased on an annual basis. In June 2011, IOH was 38.78 percent and was higher than the current one by 1.28 percentage points. Salary increases by 3.81 percent and a fall in property prices by 5.29 percent were so strong that IOH fell even despite higher interest rates on loans, which increased by 0.5 pp in 12 months
Great variation in regions
Almost like every quarter IOH achieved the highest values in Kraków (43.48%) and Poznań (43.30%), and the lowest was in Katowice (26.75%). The inhabitants of Wrocław should enjoy the most, however, as it was in this city that the Index fell the most. In June, IOH for the capital of Lower Silesia amounted to 36.64 percent and was lower by as much as 6.24 percent than 3 months ago. In this case, the decrease in the Index was caused by an increase in salary by 10.87 percent on a 3-month basis. IOH recorded a large increase in the Tri-City in the second quarter (18.80 percent), but it was mainly due to the extremely low level of the index 3 months ago.
For the Tri-City, in annual terms, IOH fell by over 7 percent. A record decline was also recorded in Katowice. Over the past 12 months, IOH has fallen 9.44 percent there. This change was caused by a combination of two favorable factors. The average salary increased (by 8.42 percent) and the average offer price of real estate decreased (by 6.91 percent). This means that the difference between agglomerations where the IOH is the lowest (Katowice) and the highest (Kraków) is systematically growing. An example family to pay back a loan for the purchase of the same apartment had to spend only 26.75 percent of their net income in Katowice, but in Kraków it was as much as 43.48 percent of income.
The Mortgage Burden Index shows how much of Polish families’ net income is absorbed in repayment of a new mortgage. IOH is prepared as an average for the 7 largest Polish agglomerations (Kraków, Tricity, Wrocław, Poznań, Katowice, Łódź, Warsaw), assuming that a loan for 30 years for the purchase of a 55-meter flat is taken by a family of two, earning twice the average monthly salary in the enterprise sector for a given province. The index is also calculated as the average for loans with LTV (loan to value) at the level of 100 and 80.
The following factors have an impact on IOH: offer prices of flats on the primary market for a given agglomeration, the level of average net remuneration in a given voivodship and the current loan interest rate. The basis for the prices of flats used in the construction of the index are the data provided by redNet Consulting on the basis of the tablesesofert.pl. The index is prepared with an approximately one month delay compared to the end of the quarterly reporting period adopted by the Credit House Prince Hal, as the data of the Central Statistical Office on remuneration in individual voivodships are available only at the end of the month, which follows the month to which they refer.