Moneta Money Bank has published a breakthrough offer – a mortgage with a fixing period of five years or more and with repayment insurance can now be purchased at 4.49%. The motivation is obvious – the banks’ mortgage business is declining and beating offers by hundredths of a percent will not save it. 121% year-on-year volume growth is still not enough, considering how dismal last year was for mortgage volume.
What’s interesting? We were all expecting more significant rate cuts by commercial banks to occur in the wake of the CNB’s base rate cut. This could theoretically happen as early as 21 December, but it is not certain and the CNB is not clear either. Given that November inflation ended up two tenths of a percentage point above the CNB’s forecast, if a cut in the base rate does occur, it will be rather symbolic, a quarter-point cut.
So is Moneta’s move the first shot we have been waiting for? More than a percentage point below the average is such a tempting offer that we can expect an influx of clients who have been hesitating to this bank. The number of mortgage seekers who can reach it now could increase by leaps and bounds with a percentage point better rate.
It can be assumed that Moneta will not be alone in this, although perhaps the competition will not lower rates so dramatically. This means an increase in demand and the number of people on tours. And when that happens, landlords will suddenly have room to raise prices. By how much, of course, will vary from supply to supply, but I wouldn’t be surprised to see prices jump – perhaps only temporarily – by as much as ten percent in a matter of weeks or months.
So time is running out for people who want to be able to get their own home at a good price. It turns out that even if the CNB does not lower rates, the market can lower them on its own. The race against time is on. Those who can get a mortgage and tighten it now have the perfect opportunity to grab an apartment in Prague at a good price. For those who have a promising path to a mortgage but still need time, there is alternative financing and a deferred mortgage. For new buildings, this solution is now offered by around 40% of developers as the ultimate marketing ploy for selling apartments in their projects.
Those who want to choose from quality flats on the whole Prague market, not only from new-builds in a particular project, can try Ownest, which will help them with their choice and allow them to postpone their mortgage for 6 to 24 months, when rates will be lower than today, whether they are pushed down by the CNB or by the market itself. Most importantly, it will allow prospective buyers to hedge their price – the price at which the prospective buyer will have the right, not the obligation, to purchase the home will be agreed in advance and will not reflect the market price, which is likely to rise significantly with cheaper mortgages.
The bitter truth is that those who don’t want to take out or put down a mortgage now will not save. With cheaper mortgages, the deferred demand from the last year and a half to two years will flood the market and the rise in house prices in the capital will almost certainly outstrip the fall in mortgage prices. In two years’ time, it could be too late for buyers who could either manage a mortgage now or at least postpone it meaningfully to own their own home in Prague. Those who do not want to commute to Prague should start solving their situation as soon as possible.
Author: Martin Machala – Co-Founder at Ownest
