Czech mortgage rates have seen a slight decrease for the second consecutive month, as reported by the Swiss Life Hypoindex. While mortgage rates for loans up to 80% of the property value remain below 6%, mortgages for young borrowers (above 80% loan-to-value ratio) have become slightly more expensive.

According to the Swiss Life Hypoindex, the average offer rate for mortgage loans stood at 6.24% per year as of July 10th. This reflects a decrease of six basis points, following a minor decrease of two basis points in June. Comparing the data to the same period last year, the average offer rate in July 2022 was the same. It was during that time that the average offer rate first crossed the six percent mark in response to the Czech National Bank’s previous rate hike.

Jiří Sýkora, a mortgage analyst at Swiss Life Select, noted that while some banks are attempting to stimulate the holiday mortgage market by lowering interest rates, it may be premature to conclude that this establishes a longer-term trend. The Swiss Life Hypoindex has remained relatively stable at similar levels for several months, and Sýkora believes that rates are more likely to stagnate, with any more significant changes potentially occurring by the end of the year.

For borrowers with a mortgage loan of CZK 3.5 million, arranged at 80% of the estimated property value, with a repayment period of 25 years and an average offer rate of 6.24% per year, the monthly payment in July is CZK 23,068. This represents a decrease of CZK 127 compared to the previous month. The average monthly mortgage payment has hovered above the CZK 23,000 threshold for the past twelve months, except for October of last year when it fell slightly below.

Mortgages with a five-year fixation period up to 80% loan-to-value (LTV) have dropped below the six percent threshold, specifically at 5.99%. The most significant decline of 0.16 percentage points was observed in mortgages with a three-year fixation period, which banks are offering on average at 6.28% per year. Mortgage rates with one-year fixations decreased by six basis points to 6.61%, while ten-year fixations remained unchanged.

Conversely, mortgage rates for “young people mortgages” (above 80% LTV) have become slightly more expensive over the past month. Mortgage rates with a one-year fixation period increased by 0.1 percentage points to 6.1% per year. Mortgage rates with three and five-year fixations saw marginal increases of one basis point to 6.56% and 6.27% per year, respectively. Mortgages with a ten-year fixation period experienced a three basis point increase to 6.36% per year.

Given that the Czech National Bank has maintained interest rates unchanged, with the two-week repo rate remaining at seven percent since June 22nd last year, analysts do not anticipate any rate decreases in upcoming meetings. As a result, significant reductions in mortgage rates are unlikely until the end of this year, with rates expected to remain relatively stable.

Article by Prague Forum