Mortgage rates have fallen slightly, and this is the biggest drop in two years

The average mortgage offer rate, according to Fincentrum Hypoindex, reached 6.27 percent at the beginning of March. It thus fell by a tenth of a percentage point month-on-month. Even a barely noticeable decline was enough to make it the largest in the past two years.

“Mortgage banks have started to take a more active approach to their pricing given the coming spring and the start of the construction season, and in the context of the competitive struggle, some banks have started to cut mortgage interest rates, which has also been reflected in the Fincentrum Hypoindex,” said Jiří Sýkora, mortgage analyst at Fincentrum & Swiss Life Select.

Over the past two years, the average mortgage offer rate has mostly been rising, with only a slight decline in September and October last year (by five hundredths and three-hundredths of a percentage point, respectively), with a more exciting drop recorded on March 6 this year, when the rate reached 6.27 percent, a tenth of a percentage point lower than a month earlier.

“The current small reduction, together with the fall in the value of some properties, may yet stir the mortgage market a little. However, this possible recovery will only be a small patch on the huge drop that the mortgage market experienced in the previous year,” Sýkora mentioned.

Three-year fixings went down the most

All average mortgage offer rates for all fixings and LTV levels, i.e., mortgages up to 80 percent of the mortgage value of the property and above 80 percent of the mortgage value, saw a decline.

However, three-year fixings fell the most, by 15 basis points. The average offer rate for mortgages up to 80 percent of the mortgage value is now 6.39 percent per annum, while banks offer mortgages with LTVs above 80 percent at 6.62 percent per annum.

Rates with a one-year fixation are 12 basis points lower. Banks offer mortgages above 80 percent LTV at an average of 6.64 percent per year and for mortgages up to 80 percent LTV at 6.14 percent per year.

Fincentrum Hypoindex data also shows that mortgages with five-year fixings are now offered at the same price as ten-year fixings. Five-year fixings fell by nine basis points month-on-month, while ten-year fixings fell by three basis points to 6.03 percent per annum for LTVs up to 80 percent and 6.27 percent per annum for LTVs above 80 percent.

Monthly repayments are lower by two hundred

The monthly repayment of a mortgage loan of CZK 3.5 million arranged for up to 80 percent of the appraised value of the property with a maturity of 25 years, and an average offer rate of 6.27 percent per annum is CZK 209 lower in March than a month earlier, at CZK 23,132.

“The amount of the monthly payment thus returned to last summer’s level,” Sýkora added.

Lowering rates is not on the agenda

At the end of March, the ČNB Bank Board will again decide on the level of base interest rates. The two-week repo rate is expected to remain unchanged at seven percent.

“The rate forecasts for this year are not going well. Just as the ČNB is quietly adjusting its inflation estimates from 9.1 percent to almost 11 percent this year, we can expect any rate cuts to be delayed. Thus, the original optimistic estimates for a cut in base rates as early as this autumn do not seem very realistic. Therefore, if there is a decline in these rates at all this year, we can expect them only at the end of the year or even at the beginning of 2024,” Sýkora added.