Mortgage Loan Risk Management in the Real Estate Market

Abstract :

The purpose of this paper was to analyse the risk of mortgage loans that finance the real estate market for management purposes. It presents an analysis of Poland's economic situation in the years 2014-2018 and its macroeconomic indicators as well as a forecast for the years 2020-2022 (the study was conducted from 8 November 2019 to 6 December 2019). They showed that the situation on the mortgage market reflected the good economic situation of the country and its banking system. The profile of an average borrower with respect to mortgage loans in the period 2016-2018 is presented against the background of the promising macroeconomic situation and the economic standing of the country, considering data on the structure of mortgage loans and borrowers. For the purposes of this paper, it has been calculated that in relation to the total value of residential mortgage loan agreements active in 2019, the share of loans in default amounted to PLN 15.51 billion. This initiated the research on mortgage loans risk analysis presented in this paper. It indicates the impact of the main factors determining credit risk as well as ways of its reduction and minimisation. It was concluded that banks need to introduce modern methods of risk management that involve risk modelling, including based on derivatives, which may suggest the direction of further research. Due to the current situation of the global health and economic crisis related to COVID-19 and the deepening recession it should be emphasized thar the analyses of the economic and macroeconomic situation as well as forecasts of macroeconomic indicators of Poland's economic situation presented in this paper refer to February 2020 only. It was also pointed out that the crisis triggered by the coronavirus would result in banks introducing restrictions with respect to mortgage.