In March 2024, compared to March 2023, banks and credit unions have issued more of three types of credit products numerically: installment loans increased by 89.5%, housing loans by 87.3%, and cash loans by 3.8%. However, there was a 10.1% decrease in the issuance of credit cards. In terms of value, banks and credit unions granted higher amounts across all credit products: housing loans rose by 129.2%, installment loans by 26.7%, cash loans by 12.6%, and credit card limits by 5.8%.
From January to March 2024, numerically, banks and credit unions granted more housing loans (up 185.7%), installment loans (up 96.9%), and cash loans (up 10.7%), but issued fewer credit cards (down 1.0%).
All credit products maintained a growth trend in sales value in March 2024. The positive market situation for cash loans was confirmed not only by a 3.8% increase in numbers but primarily by a 12.6% increase in credit action value in March. The first quarter comparison also shows a positive trend, with a 10.7% increase in the number of loans issued and a 20.8% increase in credit action value.
High sales value dynamics continue to be shown by installment loans (up 10.7%), especially for amounts up to 1,000 PLN. The numerical increase was even more spectacular at 89.5%. This significant growth is mainly attributed to low-amount installment loans, largely due to converting unpaid obligations from interest-free periods in deferred payment purchases (BNPL) into installment loans through bank purchases of these debts.
The average value of cash loans issued in March 2024 was 25,010 PLN, an 8.4% increase from March 2023. However, the average value of installment loans issued in March 2024 was 1,881 PLN, which is 33.2% lower than the previous March.
It’s also noteworthy that housing loans continue to attract significant interest despite the absence of the “Safe Loan 2%” program. What drives this high credit activity? Several key factors are contributing:
– In March 2024, banks issued 18,500 housing loans valued at 7.7 billion PLN. The ongoing high sales are influenced by increased creditworthiness, mainly due to a real wage increase (about 10%) and the stabilization of interest rates. This, in turn, has led to higher loan values, with the average housing loan now at 416,510 PLN, 22.4% higher than last year, according to Prof. Waldemar Rogowski, chief analyst at BIK Group.
– The March credit activity also includes the effect of launching loans from the “Safe Loan 2%” program from applications submitted in December 2023. According to BIK statistics, banks issued 3,830 loans under this program in March, accounting for 21% of all housing loans issued and 22% of the total loan amount. Despite this, compared to the historically high January, the value of mortgages issued decreased by about 2.6 billion PLN. The lack of new applications from this program is evident in the number of people applying for housing loans – 29,660 in March versus 46,340 in December 2023. No new loans from last year’s support program are expected to be issued in April. Until a new program is launched, a further decline in credit activity is expected in the coming months. The absence of the program could reduce credit activity compared to March by about 1.5 billion PLN. However, the decline in credit activity may be partially offset by housing loans taken by individuals who, due to continually rising property prices, may accelerate their decision to borrow. The introduction of a new government program could stimulate property price increases, a phenomenon that occurred last year. As we know, history tends to repeat itself.
In March 2024, the popularity of credit cards decreased. Compared to the previous March, the number of issued cards dropped by 10.1%, but their value increased by 5.8%.
Improved quality of repaid loans
The monthly reading of the Credit Portfolio Quality Index for housing loans in March 2024 was 1.23%. Over the last 12 months (from March 2023 to March 2024), the quality of the portfolio improved, as evidenced by a decrease in the Index by (-0.43 percentage points).
– The current reading of the Quality Index is better than the previous month’s (a decrease of -0.18 percentage points). The damage rate of złoty loans is at a low level, and loans granted in a higher interest rate environment are very well repaid. In this situation, it is difficult to justify the necessity of extending loan moratoriums this year, especially for loans taken at a fixed interest rate for
a temporary period. For those who may have difficulty repaying their housing loans, a dedicated instrument is available – the Credit Support Fund (FWK), which is also set to become more accessible.
– However, the quality of indexed and denominated loans in Swiss francs is worsening. In this case, the cause does not stem from credit risk but from legal risk associated with court proceedings, explains Waldemar Rogowski.
The current March reading of the Installment Loan Portfolio Quality Index was 1.47% – only 0.24 percentage points higher than the Housing Loan Quality Index. However, cash loans are characterized by several times higher damage rates (the highest among all product groups). The March Quality Index for cash loans was 4.43%.
– Compared to March 2023, both the cash and installment loan Quality Indices improved (decreased), respectively by 0.66 percentage points and 0.44 percentage points. Further improvement in quality should be favored primarily by real wage growth at a stable interest rate level. However, the Quality Index for credit cards in March was 3.64%, the highest among all product indices except for cash loans. It’s important to note that year-on-year, the Quality Index for credit cards has decreased (improved) by (-0.49 percentage points) – says the chief analyst at BIK.
