On 14 April 2023 the Sejm passed the “Act on state support for home savings” (henceforth Housing Act 2023), the legislation that introduces the new assistance scheme for first-time home buyers. The bill is now before the Senate[1]. Thus the planned date of its entry into force – July 2023 – seems realistic. In this third part of our series[2] we continue our analysis of Housing Act 2023. We begin by discussing a few remaining points regarding Safe Mortgage 2%. We then proceed to analyze Home Account and Home Deposit.
I. Safe Mortgage 2% – a few remaining points
Both singles and married couples may be parties to a Safe Mortgage 2% loan agreement. The loan amount is capped at PLN 500,000 (€109,000), rising to PLN 600,000 (€131,000) for married couples living in the same household and for borrowers whose household contains at least one child. In principle, the interest rate and the monthly repayments are fixed, although the agreement may stipulate that the interest rate can change temporarily as a result of a temporary increase in the bank’s margin caused by a violation by the borrower of the terms of the loan agreement.
As we already noted, Safe Mortgage 2% is based on an interest subsidy calculation formula – laid down in Housing Act 2023 – whose two key elements are the bank’s mortgage loan interest rate and 2%. To ensure Safe Mortgage 2%’s attractiveness among available mortgages, Housing Act 2023 stipulates that the interest rate and the service charge of a Safe Mortgage 2% loan may not be less favorable than those of an identical, regular mortgage loan that the borrower could obtain from the same bank for the same purpose (identical in terms of amount, repayment period and manner, and down payment).
There are two more things of note – one regarding program exclusions, and the other concerning cessation of the interest subsidies. First, a Safe Mortgage 2% loan may not be used to buy partial ownership/cooperative member’s ownership of an apartment or house. Second, the interest subsidies cease in case the borrower does not move into the apartment or house purchased or built using Safe Mortgage 2% within 24 months of the purchase or submission of a construction completion notice.
II. Home Account and Home Deposit
Eligible to open a Home Account (henceforth Account) or a Home Deposit (henceforth Deposit) are individuals who: 1) do not own, and have never owned, an apartment or house; 2) do not have, and have never had, a cooperative member’s right of ownership to an apartment or house; 3) do not have, and have never had, another Account or Deposit, unless such an Account or Deposit was closed before their 18th birthday and the home bonus accrued to it was not paid out; and 4) are between 13 and 44 years of age. Housing Act 2023 permits some exceptions to 1) and 2), however, depending on the size of the owned apartment or house and the number of children.
Accounts and Deposits are operated only by banks that have signed cooperation agreements with BGK, the state bank. Accounts and Deposits have to meet the requirements for a bank account agreement as set out in Article 52, paragraph 2 of the Banking Law with changes introduced by Housing Act 2023. Accounts and Deposits are operated in Polish zlotys. No charges or fees are levied by banks for their operation. The interest on Account and Deposit savings may not be lower than 75% of the interest that the bank offers on its regular savings accounts. The interest earned on Account or Deposit savings is exempt from tax.
An Account may be operated for a maximum of 10 years. The saver must make regular monthly payments into their Account of a minimum of PLN 500 (€109) and a maximum of PLN 2,000 (€435). After 10 years, the Account is transformed into a Deposit.
Deposit is a 12-month term deposit with a fixed interest rate, which may be renewed up to four times (unless the saver is under 30 years of age, in which case it may be renewed regardless of the number of previous renewals)[3].
Importantly, withdrawals from Accounts and Deposits are subject to tax. After 12 months, the saver is entitled to change banks free of charge, i.e. to move funds from their Account or Deposit to an Account or Deposit opened with another bank. The original bank has to transfer the funds within 14 days of the saver’s request.
If the saver acquires ownership of an apartment or house (or a cooperative member’s right of ownership to an apartment or house) during the term of their Account or Deposit, they must notify the bank about this fact within 30 days of the acquisition, unless the property was acquired through inheritance.
Safe Mortgage 2% and Home Account/Deposit are two key pillars of the new government assistance scheme for first-time home buyers being introduced via Housing Act 2023. As we see, they address different stages of the journey to own your first home: the purpose of Safe Mortgage 2% is to help those who already have the down payment needed to qualify for a mortgage to pay their rates, whereas Home Account and Home Deposit will help people save for the down payment. In the next, fourth and last part in this series we will take a closer look at the home bonus, and at the cooperation agreements between BGK, the state bank, which will fund the program, and commercial banks, which are to offer Safe Mortgage 2% to customers. The conclusion of such agreements is necessary for the scheme to become reality.
[1] Cf. Druk nr 3096, 3096-A – Sejm Rzeczypospolitej Polskiej
[2] The first article in the series can be found here Part I and the second one here Part II
[3] Example: a saver who is 13 years old when opening an Account and 23 when their Account is transformed into a Deposit can hold their funds in the Deposit for seven years.