In March, the mortgage market in the Czech Republic showed signs of growth. Banks and building societies granted mortgages totalling CZK 18.2 billions, an increase of 15.5% compared to February and 50% higher than in March of the previous year.
According to the director of the mortgage bank (ČSOB), Martin Vašek, ‘The current data confirm the positive market recovery. Year after year we see a continuous growth of interest in buying real estate, the gradual trend of increasing interest in energy-efficient housing is proving attractive’. New mortgages disbursed without refinancing increased by 19% compared to March to 15.4 billion crowns. This represents a monthly increase of CZK 2.4 billions, or 18.6%. At the same time, the volume of refinanced loans, both internally and with other institutions, remained stable at CZK 2.8 billions, in line with February’s data. However, in March, the share of refinanced loans in total disbursed (amounting to 4,490 mortgages) dropped to 15.3%, lower than the average of the last six months. These numbers, however, are 30% lower than in March 2020 and 2021, when the number was 6.7 thousand and 9.5 thousand mortgages granted, respectively.
From an interest rate perspective, there was a decrease from 5.36% in February to 5.19% in March. This decrease was influenced by the decline in market interest rates, which in the first quarter of the year reached their lowest level since 2022, following expectations of an imminent rate cut by central banks. Mortgage rates are expected to continue to react to a number of factors, including the development of CNB base rates, the inflation outlook, economic development and the dynamics of similar interest rates abroad. In support of this, according to the chief economist of the Czech Banking Association, Jakub Seidler, another factor that has impacted domestic interest rates is the slowdown in US inflation, which has caused the market to further reassess the pace of interest rate cuts. This led to the highest level of market rates for longer maturities in April and dampened the decline in mortgage rates recorded.
Although mortgage rates remain above the average of the past two decades, Tomáš Trauške, Country Director at 4fin, noted that there is a growing expectation of further interest rate reductions and concerns about rising real estate prices. This environment has led to an increase in short-term mortgages with maturities of up to three years, fuelled also by prospects of better economic conditions in the future.
The average mortgage value increased from CZK 3.38 millions to CZK 3.44 millions in March, marking the highest level since December 2021, but remaining slightly lower than the peak in November 2021, when it was CZK 3.46 millions. Considering that a one percentage point increase in mortgage rates leads to an increase in monthly repayments of between CZK 1,500 and CZK 2,000 for an average mortgage, with the current mortgage rate, there is an increase in monthly payment of approximately CZK 6,000.
In conclusion, the mortgage market in the Czech Republic presents itself as an evolving environment, characterised by an intense recovery and an increasing sensitivity to macroeconomic and interest rate changes. These data outline a cautiously optimistic scenario for the future of the country’s real estate sector.
Sources: https://www.ceskenoviny.cz/ https://www.cbamonitor.cz/
AI-generated image
Graphic source: https://storyset.com/
