Czech Mortgage Rates Slightly Decrease

Czech mortgage rates have slightly decreased for the second time in a row, according to the Swiss Life Hypoindex. Mortgage rates for loans up to 80% of the property value are below 6%, but mortgages for young people (above 80% LTV) have become more expensive.

The average offer rate for mortgage loans, according to the Swiss Life Hypoindex, reached 6.24% per year as of July 10th. The decrease of six basis points is due to a slight decrease of two basis points in June. Data from last year’s time showed that the average offer rate was the same in July 2022. This was when the average offer rate crossed the six percent mark for the first time, responding to the Czech National Bank’s last rate hike.

“Some banks, at least, are trying to stir up the holiday mortgage market by lowering interest rates. The range of offers is quite wide. However, it would probably be premature to say this establishes a longer-term trend. Despite the small fluctuations, the Swiss Life Hypoindex has remained at similar levels for several months,” added Jiří Sýkora, a mortgage analyst at Swiss Life Select.

According to Sýkora, “Rates will more likely stagnate, and any more permanent changes could occur by the end of this year.”

Lower Monthly Payment by 127 Crowns

The monthly payment for a mortgage loan of CZK 3.5 million, arranged to 80% of the estimated property value, with a repayment period of 25 years and an average offer rate of 6.24% per year, is CZK 23,068 in July, a decrease of CZK 127 from the previous month.

“The mortgage loan installment is decreasing for the second month in a row, just like the average offer rate. The average monthly mortgage payment has been above the CZK 23,000 threshold for the last twelve months, except October of last year, when it fell nine crowns below this threshold,” added Sýkora.

Cheaper and More Expensive Mortgages

Mortgages with a five-year fixation period up to 80% LTV have dropped below the six percent threshold, precisely 5.99%. A maximum of 80% of mortgages with a three-year fixation period have seen the most significant decline of 0.16 percentage points. Banks, on average, offer them at 6.28% per year. The rate for a one-year fixation is 6.61%, six basis points lower. Ten-year fixations remained unchanged.

On the other hand, so-called “young people mortgages” (above 80% LTV) have become more expensive over the past month. Swiss Life Hypoindex data shows that mortgage rates with a one-year fixation period increased by 0.1 percentage points to 6.1% per year. Mortgage rates with three and five-year fixation periods only increased slightly, by one basis point to 6.56% and 6.27% per year, respectively. Mortgages with a ten-year fixation period increased by three basis points to 6.36% per year.

No Significant Decreases in Rates Expected

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

Thus, mortgage rates are unlikely to decrease significantly until the end of this year. “I believe that rates will more likely stagnate, and any more permanent changes could occur by the end of this year,” added Sýkora.