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The Swiss franc is less burdensome. This is how premiums will decrease
Jaroslaw Sadowski, chief analyst at Expander Advisors, notes that the Swiss Central Bank's decision will not only reduce the interest rate on loans in francs, but also lead to a sharp decline in the exchange rate of this currency.
Expander calculations show that a lower interest rate and exchange rate would cause the average premium for a Swiss franc loan to fall from PLN 2,419 to PLN 2,328. “Cheaper,” Sadowski adds Swiss franc This is bad news for Swiss franc borrowers who won in court against the bank. This means that they will receive less zloty for the francs that the bank will return to them.
As the expert points out. After the interest rate decision, the franc exchange rate fell to 4.41 zlotys, the lowest level since June 2022.. This decrease will directly affect the amount of loan installments in Swiss francs. In contrast, you will have to wait for the interest rate on Swiss franc loans to decrease, because the update usually takes place every 3 months.
After this update and at an exchange rate of PLN 4.41, the installment of the PLN 300,000 loan for 30 years, granted in January 2008, will be PLN 2,328. For comparison, the installment is from the beginning of March of this year. It was 2419 Polish zlotys – says Sadowski.
Interest rates will fall
Economists expect interest rates in Switzerland to continue to decline and may reach 1% by the end of the year.. Then the typical loan installment will be PLN 2,262 (at the current exchange rate).
Sadowski points out that for a growing group of Swiss franc borrowers, a falling Swiss franc exchange rate is paradoxically bad news. “After the court invalidates the contract, the bank must return to the borrower all the money it received from him in the form of installments. Until 2011, these installments were usually paid in zlotys, and immediately afterwards in francs. A large part of the money that the bank returns will therefore be Pay it in francs,” explains the expert.
For a loan, for example, it would be 70,556 Swiss francs. The decrease in the exchange rate from PLN 4.5 at the beginning of March to PLN 4.41 means a loss of PLN 6,350. After converting the franc, borrowers will receive PLN 311,152 instead of PLN 317,502.
The era of low interest rates is coming
The Swiss National Bank was the first to cut interest rates. However, others may follow suit. According to analysts of the Polish Economic Institute, in 2024, the central banks of the world's major economies, such as the European Central Bank (ECB) and the US Federal Reserve (Fed), will likely begin a cycle of interest rate cuts.
Expectations are for a moderate range of cuts, of 3-4 moves down. Futures indicate that the European Central Bank interest rate will be close to 3.5% and the Federal Funds rate will be close to 4% at the end of the year.
The National Reserve Bank may also take similar measures, although President Adam Glabinski stressed that the decisions of the Fed and ECB would not be an automatic reason for cuts in Poland. PIE experts expect the National Bank to cut interest rates by 25 basis points in November, after the Monetary Policy Board learns about the upcoming inflation expectations. At the same time, the influx of EU funds, if exchanged on the market and not in the Polish National Bank, could lead to an increase in the strength of the Polish zloty.
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