Red tape could strangle mortgage aid

This is the result of government legislation designed to help families buy their own homes, which was enacted four months ago. According to the legislation, banks will still ask for deposits from those seeking a mortgage. However, for eight years the government will pay half of the interest on the mortgage repayments.

The Ministry of Construction hopes that thanks to this an additional 300,000 flats will be purchased within the next eight years.

However, real-estate and mortgage experts are more skeptical, as restrictions imposed by the act could limit the potential beneficiaries to a very narrow group.

Firstly, only single parent families and families who do not own any another property are allowed to receive preferential credit. Currently, more than 50 percent of people interested in buying a property are single or live in an informal relationship. Moreover, the total useable space cannot be bigger than 75 sqm in the case of apartments and 140 sqm in the case of houses.

However, the main limitation is the maximum price per sqm above which preferential credit will not be given. It is calculated on the basis of the average cost of construction submitted every six months by voivodships and main cities, and it is much lower than the real market price. For example, in Warsaw this maximum price is zł.4,370.50 per sqm - the average market price is about zł.7,400. The Ministry of Construction is currently working on an amendment to the act to bridge this gap.