What are the components of the mortgage interest rate?


Interest rate is one of the most important factors for choosing a loan offer for mortgage borrowers. It is worth knowing that this value consists of two components. Moreover, the borrower is able to negotiate the mortgage rate.


The mortgage interest rate consists of two components: a base rate, also known as the reference rate, and a bank margin that is negotiable with the bank. Whenever we take out a mortgage , we pay interest on it. They are calculated at a pre-determined interest rate and should be seen as the loan price. This is the remuneration that the bank charges for the financing granted.


The interest rate is one of the most important elements of credit costs, affecting their final amount. It can be fixed or variable, which is why we are talking about loans with a variable interest rate or a fixed interest rate.

In the case of a mortgage, the interest rate consists of two elements:

  • base rate
  • bank margin.

Base rate on mortgage loans

Base rate on mortgage loans


When calculating mortgage rates, the bank takes into account the base rate, i.e. the interest rate or reference rate. This is the price you pay for borrowed capital. When interest rates remain low, the situation is favorable for borrowers because loans get cheaper. Banks have easier access to funds that they can spend on lending.


For mortgage loans in dollars, the most important is the interest rate calculated according to the index. Its amount is determined for a specific time, among others 3 months or 6 months by the Monetary Policy Council. It is a variable factor.


Bank margin

Bank margin


An important element for the final mortgage interest rate is the bank margin. It is part of the interest rate that is set by the bank and can be negotiated. A customer taking out a mortgage has the option of negotiating a lower bank margin with the bank, provided he has certain advantages in the form of:

  • very good credit history,
  • very high creditworthiness,
  • high own contribution.

The lower the bank’s margin, the higher the attractiveness of the loan offer. Some banks are willing to grant a low-margin mortgage if the customer chooses to use other banking products in addition to the loan obligation, including a bank account, savings account , credit card and the like.


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