PLN mortgage loans with WIBOR interest rate
The specialization of our law firm are court cases regarding PLN loans with an interest rate based on the WIBOR rate. The interest rates set by the Monetary Policy Council in our country do not have a direct impact on the interest rate on PLN mortgage loans. However, this influence has the WIBOR index, i.e. the cost of money on the interbank market. WIBOR usually increases as interest rates rise. When the latter were strongly raised, WIBOR also increased, and thus the loan installments. Borrowers have learned what interest rate risk is.
The role of WIBOR in mortgage
The WIBOR indicator should show for how much the bank buys money. This is the price at which banks lend money to each other. Meanwhile, for a decade there have been voices that the WIBOR indicator is archaic and outdated. Its role is important because its amount depends on what installment borrowers will pay in a given month. After adding the bank's margin to WIBOR, we get the interest rate on the PLN loan. The European Union itself had reservations about the method of determining WIBOR, and now it also has the Polish Financial Supervision Authority. WIBOR continues to rely on banks' declarations of how much they could lend money to each other, although they haven't actually done so since the financial crisis and the collapse of Lehman Brothers. Since then, banks have stopped lending money to each other, hence the description of this crisis as a crisis of confidence.
Determination of the WIBOR ratio in loans
Ten banks (panelists) are currently involved in determining the WIBOR ratio:
They provide input data that should reflect the cost of obtaining money. In accordance with the BMR Regulation (full name: Regulation (EU) 2016/1011 of the European Parliament and of the Council of 8 June 2016 on indices used as benchmarks in financial instruments and financial contracts or to measure the performance of an investment fund and amending Directives 2008/48/EC and 2014/17/EU and Regulation (EU) No 596/2014), benchmarks should reflect real transactions.
Meanwhile, these transactions are practically non-existent. Therefore, the question arises how WIBOR can illustrate the cost of money if these transactions on the interbank market do not actually exist. In the opinion of lawyers, the WIBOR indicator, on which the interest rate on millions of loans depends, is artificially inflated and does not reflect the real cost at which banks obtain financing, and is a hidden margin. In addition, banks add a fixed margin to WIBOR, on which they earn. Therefore, the question arises whether banks do not also earn on WIBOR due to the fact that this indicator is inflated. So banks can earn twice on the margin and on the difference between WIBOR and the actual cost of obtaining money. We are dealing here with a situation similar to the problem of spread and double valorization in the case of franc holders and CHF indexed contracts. This argument potentially opens up a field for borrowers to challenge the use of the WIBOR indicator in loan agreements in courts.
Solutions in court cases concerning mortgage loans with the WIBOR indicator
The first lawsuits on the method of determining the amount of WIBOR has been submitted to courts. When the courts share the positions of the opponents of WIBOR, three solutions may come into play:
1. The first is the court's determination that the WIBOR rate is defective and all provisions regarding interest will be removed from the loan agreement. The bank will then be obliged to return to the borrower all interest installments paid. The borrower will continue to repay the loan, but without interest, i.e. for the same loan period, the same number of installments, but without the interest part. In this way, the borrower will return to the bank only the capital paid out. This way of repayment of the loan resembles the use of the sanction of a free loan.
2. In the second case, the court may consider that the WIBOR rate is set incorrectly and will therefore remove this indicator from the contract and leave the bank's margin. The interest rate will then be based only on a fixed margin throughout the loan period.
3. In the third situation, the court may consider that WIBOR is determined incorrectly and therefore invalidate the entire loan agreement. This solution, however, may turn out to be unfavorable and difficult to bear, because once the court has determined the invalidity of the contract, the borrower would be bound to return to the bank the entire amount of the loan made available, which is problematic if he has not yet repaid the amount of the loan paid to him.