Polish parliament approves law to suspend mortgage repayments

Poland’s parliament has approved a law that will allow borrowers to temporarily suspend mortgage repayments without cost for four months this year and another four months next year.

The measure passed with support from both the ruling coalition and opposition, but analysts warn that it stands at odds with the monetary tightening being carried out by the central bank, which has repeatedly raised interest rates in response to soaring inflation, which in June reached its highest level in 25 years.

On Thursday evening, the lower-house Sejm, where the government has a majority, voted almost unanimously in favour of most amendments to the legislation proposed by the upper-house Senate, which is controlled by the opposition.

Those amendments to some degree limit the scope of the debt moratorium, meaning that only holders of mortgages in zloty (rather than foreign currencies) for their own housing needs will be able to benefit from them.

“In a democratic system, banks should be an element of the state, not an element of exploitation,” Marek Suski, deputy head of the ruling Law and Justice (PiS) parliamentary caucus, told the Polish Press Agency (PAP) ahead of the vote. “Today the interest rates on some loans can be compared to usury.”

According to an opinion issued by the National Bank of Poland (NBP), Poland’s central bank, the cost for the banking sector of the so-called “credit holidays” granted this year and in 2023 could reach 20 billion zloty (€4.18 billion) if all those eligible were to participate.

In order for the law to enter into force, it must be signed by President Andrzej Duda, normally a PiS ally. He can also veto it (a step that can be overturned by a three-fifths majority in the Sejm) or send it to the Constitutional Tribunal (TK) for assessment.

Duda recently indicated that he supports “credit holidays” only for those in the most difficult financial situation, which has led to speculation that he may refer the legislation to the TK, reports PAP.

PiS spokesman Radosław Fogiel told Wirtualna Polska that he hoped the president would sign the bill – which is already “a good compromise” between different interests – into law.

Some experts, however, are less enthusiastic about the measure, which comes as the central bank has raised interest rates to their highest level in over 17 years in response to soaring inflation.

“This, in our view, is highly irresponsible and at odds with what the central bank is doing,” said Rafał Baniak, president of Employers of Poland, the country’s largest employers’ association, quoted by financial news service Money.pl.

“Fighting [inflation] when you raise interest rates and pour money makes little sense, if not none at all, especially if this money – I am talking about credit holidays – is to go to almost everyone who is in debt, who lives in their own home,” financial analyst Piotr Kuczyński told TVN24.

“I am all for helping those who have massive problems paying their loans; of course, it has to be done,” he added. “But for everyone to pour money from a helicopter, as Ben Bernanke once said? That is definitely too much.”

Earlier on Thursday, the central bank’s Monetary Policy Council (MPC) had raised its benchmark interest rate by a further 50 basis points, lower than forecast by analysts

Before the MPC met to decide on the new rate, one of its members, Ludwik Kotecki, said that the government’s loose fiscal policy, along with rising commodity prices, was responsible for keeping inflation high. “When fiscal policy is loosened, the MPC has no choice but to raise rates,” he told PAP Biznes.

In recent months, however, the NBP governor has come under fire from the opposition and some social movements over the rising cost of credit. Yesterday saw a protest in Warsaw by farmers against interest rate rises.

Main image credit: Sebastian Indra / MSZ (under CC BY-NC 2.0)

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.