Czech Mortgage Market Shows growth Despite Rising Interest Rates
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Interest rate reductions Proceed Cautiously
Although strong demand for mortgages exists, banks remain hesitant to substantially lower interest rates. The average interest rate for new housing loans in November saw only a marginal decrease from 4.9% in October to 4.85%. consequently, the average monthly installment for a 30-year mortgage of CZK 3.84 million stood at CZK 20,241 in November, only around CZK 100 less than the previous month. This slow pace of mortgage rate reductions stands in contrast to the faster decline in the Czech National Bank’s basic interest rate, currently at 4%. The discrepancy has led to criticism that banks are widening their profit margins on loans. However, the Czech Banking Association (CBA) defends banks, arguing that mortgage rates are influenced by a multitude of factors, including inflation forecasts, economic outlook, and currency exchange rate fluctuations.Mortgage Rates Likely to Remain Stable in the Coming Year
Despite recent fluctuations in the financial market, experts predict that mortgage rates will remain relatively stable throughout the next year. Michaela Pudilová, a mortgage loan analyst at Broker Consulting, stated, “Given the current situation, we do not expect significant fluctuations in either direction.” Banks are currently focused on maintaining profitability, and one factor contributing to this strategy is the concern about clients possibly switching to competitors offering lower interest rates. To mitigate this risk, banks are setting interest rates at levels that provide a buffer against potential losses. Tom Kadeřábek, head of the product department at Swiss Life Select, explains, “Therefore, we can count on the fact that the banks will not engage in significant rate reductions unless the competition chooses an aggressive pricing policy.”Banks See Healthy Profits
The current market conditions have allowed banks to achieve healthy profits.## czech Mortgage Market Q&A
**Q: What was the total value of mortgages granted by Czech banks and building societies in November?**
**A:** Over CZK 26 billion.
**Q: How does this compare to the same period last year?**
**A:** It represents a 62% increase year-on-year.
**Q: What is fueling the resurgence in mortgage lending?**
**A:** The revival of real estate prices.
**Q: Are mortgage volumes currently at record highs?**
**A:** No, they are still below the record highs witnessed in 2021.
**Q: What is expected to drive continued growth in the coming months?**
**A:** Both new mortgage applications and the refinancing of existing loans taken out during periods of lower interest rates.
**Q: Who is preparing for a wave of clients refinancing mortgages from lower interest rate eras?**
**A:** roman Vítek, director of the Client Division at Fio banka.
**Q: What is driving the interest in securing mortgages sooner rather than later?**
**A:** The gradual reduction of interest rates and the concern of rising property prices.