Housing Finance Market Overview

In Poland, housing finance is mainly raised from banks though also specialised mortgage banks operate in the market. In 2007, the PKO Bank Polski had the largest market share of the mortgage market in Poland. Around 30 per cent of all mortgage transactions were processed through mortgage brokers in 2007 - a very high quote for Eastern Europe. From 2000 to 2007, the housing finance market has seen a massive boom in Poland. The mortgage debt to GDP ratio increased from 2.1 per cent in 2000 to 11.7 per cent in 2007.

The Market from the Perspective of the Demand Side

To finance property purchases has been relatively easy. Financial institutions granted home buyers mortgages in excess of (the typical) 80 per cent of the property value. Indeed, even loan-to-value ratios of 110 per cent were widespread. In 2007, the share of foreign-denominated loans was larger than 50 per cent. At the same time, most mortgage loans have been variable interest loans. Interests on mortgage loan not exceeding a set maximum are deductible. In the course of the financial crisis, many banks have scaled back or eliminated foreign currency lending, increased their margins, and dramatically ramped up downpayment demands from their customers.

House Price Development

There is no reliable source for the development of house prices in Poland. The data and news coverage available suggest that a period of price stagnation from 2001 to 2004 was followed by a period of strong house price increases with annual growth rates between 28 and 33 per cent. Since the beginning of 2008, this boom has slowed down and house prices seem to be even falling since the end of 2008.

Refinancing Instruments

Banks rely mostly on deposit–based funding for their housing finance activities though the issuance of Covered Bonds is increasing in importance. Yet, in 2007, the outstanding Covered Bonds amounted only to 1.9 per cent of all outstanding residential lending.