When is it worth refinancing a PLN loan?
Although the average margins for new loans in PLN are higher than in the hole falling at the turn of 2007 and 2008, the cost of loans has clearly fallen compared to the last crisis. Calculations, based on NBP data on currently repaid loans, indicate that the worst situation is for those who were in debt between January 2009 and August 2010. At that time, banks tightened their lending conditions very much. This applied not only to margins, but also to the required own contribution and minimum income. At its peak, the average margin level exceeded 3% (August and September 2009).
Interest rate on newly granted loans
NBP statistics on the interest rate on newly granted loans end in June this year. and suggest that the average level of margins was then 2%. This is average for the entire market. According to financial analysts’ data for specific assumptions (loan for PLN 300,000, 30 years repayment and LTV 75%; the borrower has a ROR account and a credit card in the same bank), the average margin in June was 1.29%, in July it fell slightly ( 1.2%), and in August it returned to 1.29%. The average interest rate on new loans is 5.95%.
Taking these conditions into account, the experts checked what benefits the loan (refinancing) exchange could have brought after 2008 for a new one. In the first step, the monthly installment of the loan, estimated in individual months, was estimated in the period from January 2009 to August 2010. Since August 2010, the margins for the given example have fallen below 2% and are systematically heading towards 1%.
Installment of the new loan
The assumptions made during the calculations are very important, because they result in later conclusions:
• In each case, calculating the installment of the “old” loan, it was assumed that it bears interest at the level of the sum of the average margin (estimated on the basis of NBP data) 3-month Euridor rate (4.73%).
• For simplicity, it was assumed that in each case the borrower still has to pay exactly 300,000. PLN, divided into 360 installments.
The average installment for loans taken out in the period from January 2009 to June 2010 is PLN 2104 for the adopted assumptions. The maximum level in the audited period is PLN 2208 (loan taken in September 2009).
Then, the installment of the new loan, estimated on the currently offered terms, was estimated. The assumptions made earlier are also extremely important here. It was assumed that the loan was refinanced on terms offered to new borrowers. In fact, refinancing parameters may be slightly better in some banks. Three refinancing options have been developed: