It is just over a year since the CNB (Czech National Bank) regulation came into force, which, combined with soaring interest rates, has cut off a significant number of potential buyers from mortgages. While previously, so-called mortgage holders made up over half of the buyers of new flats in Prague, since April last year, when the regulation came into force, they are more likely to be just one percent. The DTI and DSTI indicators have quickly turned into a nightmare for many mortgage applicants, especially the latter.
To put it into perspective: the average gross wage in Prague is currently just under 49,000, according to the Czech Statistical Office, which means less than 39,000 net. According to the DTI indicator, with this income the average Prague resident over 36 years of age could borrow around CZK 3.95 million. However, the DSTI indicator, i.e. the ratio of debt repayments to income, will allow him to spend a maximum of CZK 17.5 thousand per month on a mortgage, which at current interest rates means only around CZK 2.8 million over the 30-year term of the mortgage. That is, more than a million crowns less than the DTI. So the road to a new home ends sooner than it began.
Statements by CNB representatives indicate that interest rates will probably not be cut for some time at least, but tomorrow’s meeting of the CNB board should discuss the DTI and DSTI indicators. The banking sector is in very good shape and mortgage delinquency is also still very low. Removing, or at least relaxing, these requirements is exactly the solution that the new housing market needs.
Up to half a million people are considering buying a new apartment in Prague in the next five years, according to a recent survey by Central Group. With more favourable interest rates and a relaxation of the DTI and DSTI indicators, these people would be able to stop postponing their purchase decisions – new housing would become more affordable for a much wider group of people, the banking sector would not suffer any harm, and the state would also gain money from VAT.
Source: Central Group
