The Czech housing market continues to face challenges as mortgage rates remain stubbornly high. According to the Swiss Life Hypoindex, the average offered rate stands at 5.32%, a mere 0.02 percentage points lower than in October. This minimal decrease offers little relief to potential homebuyers in the Czech Republic.
For a model mortgage of 3.5 million crowns, secured up to 80% of the property value with a 25-year term, the monthly payment in November amounts to 21,116 crowns. While this represents a decrease of nearly 1,400 crowns since the beginning of the year, it’s a far cry from the affordable rates in recent years.
Jiří Sýkora, a mortgage analyst at Swiss Life Select, suggests that banks have little incentive to significantly reduce rates. “They may have already met their annual lending targets or are using higher margins to cover losses from periods when rates were below two percent,” he explains. Sýkora predicts that a more substantial reduction in rates might not occur until early next year or possibly as late as spring, when banks traditionally try to stimulate the market after the winter lull.
Banks’ reluctance to lower rates stems from concerns about triggering a wave of refinancing, which could prove costly for them. Tom Kadeřábek, head of the product department at Swiss Life Select, notes that banks are currently building reserves for potential early repayments, effectively passing these costs onto clients.
Despite the Czech National Bank potentially lowering the base interest rate by a quarter percentage point, experts don’t anticipate immediate relief for mortgage seekers. The interbank market trends, with five-year crown swaps hovering just below 3.6%, further complicate the situation. As Jiří Tyleček, an analyst at XTB, points out, “These are the highest values since early July, and the upcoming U.S. presidential elections could significantly impact them.”