The anticipated drop in mortgage rates following the introduction of new early repayment fees and post-summer promotional offers has failed to materialize, according to recent data. The average offered rate at the beginning of October saw only a minimal decrease, falling by a mere 0.04 percentage points to 5.34 percent, as reported by the Swiss Life Hypoindex.
For a model mortgage of 3.5 million Czech crowns, secured up to 80 percent of the property’s value with a 25-year term, the monthly payment at this average rate would amount to 21,155 crowns in October. Despite the Czech National Bank’s recent quarter-point reduction in the base interest rate, banks have yet to reflect this change in their mortgage rates.
Analysts suggest that banks are reluctant to lower rates significantly due to various factors. One reason is the unfulfilled expectation of more favorable conditions, such as stricter penalties for early mortgage repayment. Additionally, banks argue that longer-term rates are more crucial for mortgage pricing than the two-week rates continually reduced by the Czech National Bank.
The slow pace of rate reduction is evident in the statistics: over the past year and a half, the average mortgage rate has decreased by only one percent, while the Czech National Bank has cut its key rate by 2.5 percentage points during the same period. This discrepancy has led to speculation about banks’ motivations, with some experts suggesting that financial institutions are reluctant to forgo higher profits from existing mortgage clients.
For those whose mortgage fixation periods are ending, negotiating with banks can yield better rates. One Prague resident shared his experience of successfully negotiating his rate down from an initial offer of 5.49 percent to 4.79 percent, resulting in monthly savings of about 750 crowns. However, banks are cautious about rapidly lowering rates for new clients to avoid pressure from existing customers who might seek to reduce their rates, even with the newly introduced regulations.