Czech Mortgages are Getting Cheaper, But It’s No Miracle

Czechs who dream of owning their own homes and those whose fixed-rate mortgages have ended, leaving them with suddenly skyrocketing rates of six or seven percent, eagerly await mortgages to drop to three or four percent. Real estate experts and developers predicted that this would happen this year. While mortgages have been getting cheaper for the past four months, it’s no miracle. They’re still hovering between five and six percent.

Swiss Life Hypoindex said the average mortgage offer in September fell slightly to 6.1 percent from August’s 6.19 percent. However, the Czech National Bank still holds the interest rate at seven percent and doesn’t plan to reduce it shortly.

While some banks have recently offered traditional discounts after the summer, they’re still time-limited offers. According to Jiří Sýkora from Swiss Life Select, the average mortgage offer remains above six percent. However, some banks offer mortgages with rates almost one percent lower.

Mortgages with a three-year fixed rate are the cheapest. The average rate decreased to 6.04 percent for mortgages up to 80 percent of the property’s value (LTV) and 6.33 percent for mortgages for young people up to 36 years old (LTV above 80 percent).

Mortgages with a 10-year fixed rate and an LTV of up to 80% percent have dropped to 5.95%. They’re back below the six percent mark for the first time since October of last year.

While cheaper mortgages are good news for those looking to buy or refinance a property, don’t expect a sudden boom in the real estate market yet. The average mortgage rate is still high, and the Czech National Bank doesn’t plan to reduce the interest rate significantly.

As the mortgage rate drops, experts predict that the correction in real estate prices will stop. Prices will likely rise again, especially in desirable locations, such as major cities or mountain apartments. However, some types of properties haven’t decreased in price at all. For example, according to ČSOB, building plot prices have increased by almost sixteen percent year-on-year.