Banks and building societies granted mortgage loans worth CZK 150 billion last year, down by almost a quarter year-on-year. New loans without refinancing amounted to CZK 124 billion. Interest rates continued to decline in December, falling from 5.67 per cent in November to 5.65 per cent, the lowest level since mid-2022, according to statistics from the Czech Banking Association Hypomonitor. The data is supplied by all banks and building societies providing mortgages on the Czech market.
“In terms of the original expectations at the beginning of 2023, the reality was relatively favourable and the volume of mortgages granted ended up at the upper limit of the estimates. This was due to a combination of factors, from the relaxation of income rules by the CNB to a slight decline in property prices or a slight drop in rates. This year, the mortgage market should continue to recover and double-digit growth can be expected for the full year. However, it is still unlikely to reach the levels of the pre-pandemic years,” said Jakub Seidler, the association’s chief economist.
The volume of mortgages granted in December fell by seven per cent month-on-month to CZK 15.1 billion. It was up 93 percent year-on-year.
The volume of actual new mortgages granted without refinancing in December was CZK 12.7 billion after CZK 13.4 billion in November. This is a month-on-month decline of five per cent. The volume of refinanced loans, i.e. internally or from another institution, was CZK 2.4 billion, compared to CZK 2.8 billion a month earlier.
“The year 2024 will be about falling interest rates and a recovering market. This downward trend in rates started in late 2023. It is driven by a gradual decline in the cost of funds and the market environment. I expect a recovery in mortgage refinancing, especially for clients with interest rates around six percent. The fall in mortgage rates is also likely to have a positive effect on the property market, where limited supply and increased demand may have an effect on property prices,” pointed out Marek Richter, head of mortgage services at Air Bank.
The number of new mortgage originations reached 3,770 in December, a one-tenth month-on-month decline. In year-on-year terms, this is a 65 per cent increase. The average monthly number of mortgages granted in the last quarter of 2023 was around 4,000 per month. This is almost double the same period in 2022, but on the other hand, half the level at the end of 2020.
For the first half of 2023, there were 50 percent fewer mortgages originated year-on-year, but over 50 percent more for the second half of 2023. Compared with the pre-pandemic years 2017 to 2019, the volume of mortgages granted in 2023 was roughly one-third lower.
Interest rates have been falling over the past six months, made possible by a gradual decline in market interest rates. Despite these developments, however, mortgage rates remain above average over the past two decades and were also at similar levels to the current levels in 2008 and 2009.
The average mortgage rose from CZK 3.21 million to CZK 3.37 million in December, a return to the levels seen at the start of 2022. The highest was in November 2021, when it was CZK 3.46 million.
Source: Czech Banking Association Hypomonitor and CTK
