Czech mortgage providers experienced a surge in business in March, with the volume of mortgages provided increasing by 60% month-on-month, according to data from ČBA Hypomonitor. Banks and building societies arranged mortgages totalling CZK 12.6bn ($586m) in the previous month, marking its highest level since the middle of 2020 when the market began to cool significantly. This comes as the average mortgage rate for newly provided mortgages has fallen for the third consecutive month. The interest rate for newly provided mortgages reached 5.86% in March, marking a four basis point drop from February and the lowest value since October 2020.

The number of new mortgages provided in March was 3,485, compared to 2,289 in February, with banks providing new mortgages without refinancing in March for CZK 10.3bn, CZK 3.7bn more than in February. The volume of refinanced loans (internally or from another institution) was CZK 2.3bn, up from CZK 1.3bn in February. The year-on-year decline in mortgages provided was reduced to 59% in March from February’s 69%.

According to Pavel Čejka, Chairman of the Board of Raiffeisen stavební spořitelny, demand for loans grew in March, especially for financing energy-saving solutions. He expects this factor to play an important role in household loans for the rest of the year. Jakub Seidler, Chief Economist of the Czech Banking Association, added that the mortgage market saw a significant revival in March, with many households concluding that the high-rate environment would last longer and that it would not pay to wait for a significant reduction in mortgage rates.

Gradually falling property prices could have brought some impetus, as they continued to decline slightly in March, according to data from the Land Registry, and are already more than 20% lower in some regions compared to the peak in the middle of last year. Despite this, experts warn that this is not a trend that will continue indefinitely, and that low interest rates could contribute to another real estate bubble.

Article by Prague Forum