Economic news

• CPI: After two months of positive surprises in the CPI data, July brought a well-expected inflation spike. According to the flash reading by Statistics Poland (GUS), CPI dynamics grew from 2.5% y/y in June to 3.0% y/y in July. The primary factor behind accelerating inflation were fuel prices (+14% m/m). Increased geopolitical tensions in the Gulf aligned with discontinuation of the regulation capping fuel prices (the so-called CPN programme). Extended comment on CPI may be found here.
• FUELS: Prime Minister D. Tusk informed that in the case of a further increase in oil prices the government will propose a solution limiting the prices at least for the last two weeks of the summer vacations. A potential solution could include a decrease in the VAT for fuels. At the same time, Vice-Minister of energy W. Wrochna assessed that – given the President’s decision to have the windfall tax bill revieved by the Constitutional Court – perhaps a systemic solution should be considered. This systemic solution could mirror CIT adjustments aimed at the banking sector (setting up a sectoral, increased marginal tax rate), but it would cover the energy sector in Poland. Previously a cap on fuel prices had been in force from the end of March to the end of June and costed PLN 4.7 bn; on the other hand, windfall tax was to bring PLN 4 to the budget.
• BUDGET: The hypothetical cost to the state budget of raising the universal PIT tax-free allowance from PLN 30,000 to PLN 60,000 in 2027 is PLN 58.6 bn, and of raising the PIT progression threshold from PLN 120,000 to PLN 140,000 is PLN 11.6 bn – estimated the Ministry of Finance.
• MoF-AUCTION: At Wednesday’s auction, the Ministry of Finance sold government bonds for PLN 11.2 bn with demand amounting to PLN 12.55 bn. After the auction the state budget gross borrowing needs were financed at 70%.
• ECONOMIC SENTIMENT: The Economic Sentiment Indicator (ESI) by the European Commission took value of 100.0 pts in July, 0.1 pts. Below the June reading.
• DEBT: Poland’s development bank BGK sold PLN 2.7 bn worth of bonds, with demand for PLN 4.2 bn. At the follow-up auction investors bought additional PLN 490 mn worth of securities.
• PMI: PMI in manufacturing grew from 46.1 in June to 49.0 pts in July.

First time! Second time! Refinanced!

At the start of the year, we forecast that the refinancing of mortgage loans – that is, taking out a new loan at a lower interest rate to repay an existing one – would be a key factor in the lending market. We estimated that, after 2025, the portfolio of loans eligible for potential refinancing stood at PLN 71.3 bn, or 15% of the total mortgage volume. We can now be certain that we were correct – and, with the full set of data for the first half of the year at our disposal, we can even conclude that the pace of refinancing has accelerated further. To illustrate this point, we will cite a few figures:

• PLN 71.3 bn – this was the value of the portfolio of loans eligible for potential refinancing at the start of 2026; of these:
• PLN 20.7 bn – this is the amount of loans that were actually refinanced in the first half of the year (this figure may even be an underestimate; data for the January–May period alone indicate over PLN 20 bn); nevertheless:
• PLN 83.3 bn – this is the value of the portfolio of loans eligible for potential refinancing after the first half of 2026. The increase of PLN 12 billion since the start of the year stems from the fact that the positive effect of the interest rate cut was greater than the amount of actual refinancing.

Portfolio with potential for refinancing (gross and net) vs 5Y IRS rate

Note: Gross volume has beenre- estimated each period as the total value of loans granted from 2H21 with interest at least 100 bp above the current market interest and having been repaid for at least 1 year. Net volume is gross volume corrected for the actually refinanced portfolio.

Source: AMRON, BIK, NBP, Macrobond, Pekao Research

The increase in the volume of refinancing is evident when looking at changes in the structure of new mortgage lending in recent years. Whilst in 2023, when the Monetary Policy Council (RPP) began the process of easing monetary policy, refinancing accounted for one-eighth of total new mortgage lending, by the first half of 2026 its share of new lending had risen to one-third.

Share of refinancing in the morgage sales

Source: BIK, Pekao Research

From the perspective of the banking sector as a whole, the process of refinancing existing mortgage loans results in a reduction in interest income (as refinancing leads to a lower interest rate on the existing loan), but has no impact on the volume of loans (the refinanced loan remains within the banking sector and its value remains unchanged). However, what is true from the perspective of the sector as a whole is not true for individual banks, as in 84% of cases, refinancing involves the borrower switching to a different, new lender. In other words, in the refinancing process, the original lender typically loses the (higher) interest income stream entirely, whilst the new lender gains a new (lower) flow of interest payments.

Structure of the loans refinanced in 1H26 with respect to the age of credit (in years)

Source: BIK, Pekao Research

What is the scale of this loss of interest income resulting from refinancing? The latest data from BIK allow us to estimate this figure, albeit with a high degree of uncertainty. These figures show that refinancing most often concerns recent loans, with almost half (external refinancing) or one-third (internal refinancing) of cases involving loans less than two years old. We estimate that the refinancing of mortgage loans in 1H26 contributed to a decline in banks’ interest income of:

• At least PLN 130 mn – on the externally refinanced portfolio;
• At least PLN 16 mn – on the internally refinanced portfolio.

In other words, refinancing in the first half of the year may have been associated with a 0.5–1 per cent decline in the banking sector’s net profits. The above estimates represent the minimum scale of lost interest income (i.e. they may be an underestimate), as they exclude the refinancing of loans with a maturity of 5 years or more, given that the average interest rate on new lending during that period was generally lower than it is today.

The most significant effect of refinancing – even more significant than the loss of potential interest income for the banking sector – may, however, be a change in the structure of the mortgage market. Data from BIK leaves no doubt that, in the vast majority of cases, refinancing a mortgage involves switching to a different lender. This presents an attractive opportunity for customer acquisition for some banks – and the risk of customer attrition for others. Consequently, it is to be expected that competition in the banking sector may intensify further in the coming months, with individual lenders competing with one another to attract customers looking to refinance their loans.

Financial markets update

This is going to be a good week for Polish assets. Last week, we saw a combination of positive developments in the core markets (a dovish Fed, strong growth in Europe) and in the domestic economy (no surprise in the inflation reading). Over the weekend, there was further good news from the Middle East (Donald Trump decided against an attack on Iran, and negotiations are set to resume today). As a result, we are starting the week with a strong zloty (USDPLN at 3.73, EURPLN below 4.305), which should strengthen further. The situation on the fixed-income market is also very favourable, and as POLGBs yields have recently peaked around Ministry of Finance auctions, we expect – given the lack of upcoming auctions – that the yield on 10-year government bonds may fall to around 5.60. Given the lack of domestic macroeconomic events, we would look primarily abroad for risks to the forecasts outlined above – particularly as this week will see the release of the US July Payrolls report.