Czech Mortgage Rates Slightly Decrease

Czech mortgage rates have slightly decreased for the second time in a row, according to the Swiss Life Hypoindex. The mortgage rates for properties with a loan-to-value ratio (LTV) of up to 80% have fallen below 6%, while those for young people, i.e., over 80% LTV, have increased.

The average offer rate for mortgages, according to Swiss Life Hypoindex, reached 6.24% per annum as of July 10. After a slight drop in June of two basis points, the decline now amounts to six basis points. Data suggests that the average offer rate was at the same level a year ago, in July 2022. At that time, the average offer rate crossed the six percent threshold for the first time, reacting to the last rate hike by the Czech National Bank.

“Some banks – at least some – are trying to stir up the holiday mortgage market by reducing interest rates. The range of offers is quite wide. However, it would probably be premature to say that this is a trend of a more long-term nature. Despite minor fluctuations, the Swiss Life Hypoindex has held at similar levels for several consecutive months,” added Jiří Sýkora, a mortgage analyst at Swiss Life Select.

“The rates will rather stagnate, and there may not be any substantial changes until the end of this year,” said Sýkora.

The Monthly Payment is Lower by 127 CZK

The monthly payment of a mortgage loan of 3.5 million CZK agreed up to 80% of the estimated property value, due in 25 years with an average offer rate of 6.24% per annum amounts to 23,068 CZK in July, a decrease of 127 CZK compared to the previous month.

“The mortgage loan repayment is falling, just like the average offer rate, for the second month in a row. The average monthly mortgage payment has been above the threshold 23 thousand for the last twelve months, except for October of last year, when it dropped nine CZK below this threshold,” added Sýkora.

Cheaper and More Expensive Mortgages

Mortgages up to 80% LTV with a five-year fixation have fallen below the six percent threshold, precisely 5.99%. The highest drop of 0.16 percentage points was recorded in the maximum 80% of mortgages with a three-year fixation, with banks offering them at an average of 6.28% per annum. The rate for a one-year fixation is 6.61%, six basis points lower. Ten-year fixations have stagnated.

On the other hand, mortgages for young people, over 80% of the value of the collateral, became more expensive in the past month. Swiss Life Hypoindex data shows that the highest increase was recorded in mortgage rates with a one-year fixation, rising by 0.1 percentage points to 6.1% per annum. The rates for mortgages with a three- and five-year fixation increased slightly, by one basis point, to 6.56% per annum and 6.27% per annum, respectively. Mortgages fixed for ten years became three basis points more expensive, at 6.36% per annum.

More Substantial Rate Drops Are Not Expected

The Czech National Bank still keeps the interest rates unchanged. The two-week repo rate has remained at seven percent for over a year (since June 22 last year). According to analysts, there is likely no decrease in rates even at the next meetings.

Mortgage rates, therefore, are unlikely to experience more substantial drops until the end of this year. “I believe that the rates will stagnate, and there may not be any substantial changes until the end of this year,” said Sýkora.