The mortgage market is falling, the number of people investing in housing is dropping significantly

The mortgage market slowed down considerably in April, according to the latest Hypomonitor from the Czech Banking Association (ČBA).

Banks and building societies granted only CZK 17.5 billion mortgages, representing a significant month-on-month and year-on-year drop of a few tens of percent. The average mortgage rate for newly granted loans also rose to 4.39 percent.

In March, financial institutions concluded mortgage transactions with clients in a total volume exceeding CZK 30 billion, whereas, in April, the importance of mortgages granted amounted to only CZK 17.5 billion. This is a roughly 40 percent drop in the month-on-month comparison, and in the year-on-year comparison with April last year, it is even a 60 percent drop.

The April data probably reflected the “frontloading” in previous months, when mortgages were taken out by clients who would not have been able to obtain loans due to the Czech National Bank’s tightening of mortgage lending conditions again.

11 billion fewer newly granted mortgages

Newly granted mortgages (excluding refinanced ones) amounted to CZK 14.2 billion in April, CZK 11.2 billion less than in March. This is the lowest volume in three years.

According to the ČBA Hypomonitor, newly granted mortgages fell below 4.5 thousand. In contrast, in the first quarter of this year, an average of more than 7,000 mortgages were arranged each month, down from 9.5 thousand last year.

Banks and building societies also recorded a decline in refinanced mortgages, which amounted to CZK 3.3 billion in April, while in March, the volume was CZK 1.6 billion higher.

The average mortgage amount was CZK 3 176 080 in April.

The interest rate on new mortgage loans reached 4.39 percent in April, 24 basis points higher than in March.

The rise in rates has thus continued for a year in a row, and the average mortgage rate in April is the highest since the first half of 2011. However, it is essential to note that it also captures contracts negotiated earlier when interest rates were slightly lower.

Mortgage interest rates are now mainly in the five to 6.5 percent range. Given the evolution of market interest rates, it is expected that they are likely to rise slightly further.

“Given the ongoing conflict in Ukraine and other inflationary pressures impacting the interest rate environment, we expect mortgage interest rates to continue to rise. However, in the second half of this year, we expect growth to slow down, and eventually, rates will be stagnant for some time,” mentioned mBank’s Soňa Holíková.