Declining Mortgage Interest Rates in the Czech Republic

In anticipation of the expected decline in rates by the Czech National Bank (CNB), the first banking houses have begun to reduce interest rates on loans. Mortgage interest rates, according to experts, could soon be below the five percent threshold. This level was last seen in May of the previous year, according to the Hypomonitor of the Czech Banking Association.

As of September this year, the average rate for new mortgages without refinancing decreased from August’s 5.78 percent to 5.74 percent. Furthermore, the real estate market is seeing an increase in buyers. “Interest in mortgages is slowly reviving. A positive impulse was the deactivation of the DSTI limit in July and the banks’ action. Today, the rate for the best offers has significantly approached five percent,” says Libor Vojta Ostatek, a mortgage expert at Broker Trust.

The DSTI indicator limit, which the Czech National Bank abolished in July, determined the maximum percentage of the total amount of all monthly loan repayments that could be charged on the loan applicant’s net monthly income. Now, more people can afford a mortgage.

Banks are anticipating the development of CNB rates. “Based on the recent statements of the members of the Banking Council, we assume that the CNB may begin cautiously lowering its basic interest rate by the end of this year,” says Patrick Madle, spokesperson for ČSOB.

In the event of a decrease in the introductory interest rate, banks will also transcribe the interest rate change into the final rates for both consumer loans and mortgages. However, it is difficult to predict the exact intensity and speed of this change. But the decline will certainly be much slower compared to how fast the rates rose last year, according to Martin Novak, the Chief Analyst at Broker Consulting.