Paweł Supernak/PAP

New legislation that introduces state housing loan guarantees poses a threat to the stability of Poland’s financial system, the central bank has warned.

On Friday, Poland’s lower house adopted a bill introducing housing loan guarantees of up to PLN 100,000 (EUR 21,840) to be offered by the state via state bank BGK.

According to NBP, the central bank, some of the measures proposed in the bill may intensify negative trends on the housing real estate market and in the financial system.

In the longer term, this could potentially lead to a weakening of the financial system’s stability, the NBP wrote.

The state guarantees will generate extra demand, which “creates the risk of further augmentation of price pressure on an already very dynamic housing market where supply may currently struggle to follow the constantly rising demand,” the central bank argued.

The possibility of offering housing loans above precautionary loan-to-value (LTV) thresholds defies the purpose of establishment of those thresholds by the KNF, Poland’s financial market watchdog, in the first place, NBP said.