Banks and building societies in the Czech Republic granted mortgage loans worth CZK 24.2 billion in June, the highest value since March 2022. Compared to May, this is an increase of two per cent and 73 per cent year-on-year. Interest rates on new loans fell slightly to 5.06 per cent from 5.07 per cent in May. This is according to statistics from the Czech Banking Association’s Hypomonitor. The data are supplied by all banks and building societies providing mortgages on the Czech market.
“The latest figures from the mortgage market confirm its gradual recovery and the volume of new mortgages in recent months is among the highest in the last two years. In the first half of the year, a similar volume of mortgages was granted as in the first half of 2020, but the number of mortgages itself was still a quarter lower,” said Jakub Seidler, chief economist at the Czech Banking Association.
The volume of actual new mortgages granted, excluding refinancing, reached CZK 20.2 billion in June, up 0.6 percent month-on-month. The volume of refinanced loans, i.e. internally or from another institution, amounted to CZK 4 billion after CZK 3.6 billion in May. The number of newly granted mortgages reached 5,403, slightly below May’s level. It is the second highest level this year and, together with May, the highest level since March 2022.
“The gradual reduction of rates by the central bank was most evident in the decline of interest rates on mortgages with short fixations. This allows clients to currently take advantage of one- to three-year fixings and to respond flexibly to the new conditions in the medium term. The decline in rates on longer fixings will not be as rapid this year, also due to the ongoing uncertainty about the further development of inflation,” said Michael Pupala, CEO of Modrá pyramida stavební spořitelna, in a statement.
The interest rate on actual new mortgage loans has fallen only cosmetically. According to the association, this development is attributable to the fluctuating market interest rates, which started to rise again in mid-March and despite their volatility were at higher levels this year.
The average mortgage continued to rise in June, from CZK 3.63 million to CZK 3.74 million. Since April, the average mortgage has thus exceeded the previous record level of CZK 3.46 million set in November 2021.
A one percentage point rise in mortgage rates means an increase in monthly repayments of around CZK 1,500 to CZK 2,000 for the average mortgage size. Compared to the two per cent interest rate that was common in the market in earlier years, the current mortgage rate means an increase in the monthly payment for an average mortgage of approximately CZK 6,000. The repayment of a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 5,500.
Jana Vaisová, mortgage specialist at FinGO, said that she is seeing more interest from clients to resolve their existing mortgages before the amendment to the Consumer Credit Act comes into force in September. After that date, new clients or clients with new fixings will be subject to early exit penalties. According to Petr Klymec, director of Kousek Bytu, the main impetus for the recovery of the real estate market, and thus mortgages, are falling interest rates on bank deposits.
Despite the CNB lowering the base interest rate, rates for end clients have remained virtually unchanged, Bidli analyst Daniel Horňák pointed out. Even so, a significant recovery is evident for several months in a row. Clients have already understood that the decline in interest rates has virtually stopped and another significant reduction is no longer on the horizon, he noted.
Source: CTK
