Seeing red?

The value of mortgage loans in Poland exceeded zł.100 billion in the first half of the year, according to the National Bank of Poland. By comparison, that figure stood at zł.65.78 billion in June 2006.

Aleksandra Łukasiewicz, an expert on banking products of Open Finance, notes that the growing accessibility of mortgage loans means it is increasingly likely that borrowers, especially those with low incomes, will be unable to make their payments. Extending the duration of the mortgage to up to 50 years or granting loans whose value is higher than the value of the estate to be purchased greatly increase the risk on the mortgage.

Debt-collecting companies are already seeing an increase in their profits as they reap the rewards of borrowers' failure to repay mortgages.

Łukasiewicz suggests that banks need to raise awareness about the mechanics of mortgages. She also notes that information on mortgage loans and the risks involved is often limited to a statement that a customer is asked to sign, which states that he or she is aware of the consequences of failing to repay the loan.

Not everyone feels that Polish society is at risk, however. "Financial institutions in Poland are very rational when giving loans to people," explains Błażej Lepczyński, an expert from the Gdańsk Institute for Market Economics (IBnGR). He argues that the increasing prosperity of debt collection companies - one phenomenon which might indicate a growing problem with loans - instead stems from the overall increase in the number of borrowers as well as the trend for financial institutions to outsource debt collection.

"I do not see any threat here. Besides, the total amount of debt in society is relatively low when compared to other countries in Europe," Lepczyński suggests.

As for the quality of information banks give about the details of their loans and other products, Lepczyński notes that although it is better than previous year, there is still a lot of room for improvement. He concludes, however, that competition between banks will lead to further clarity of information.