Czech mortgage rates have experienced a minor decline for the second month in a row, as reported by the Swiss Life Hypoindex. The rates for mortgages with a loan-to-value ratio (LTV) of up to 80% have fallen below the 6% mark, while rates for young borrowers with LTV ratios over 80% have seen an increase.

The average offer rate for mortgages, as indicated by the Swiss Life Hypoindex, stood at 6.24% per annum as of July 10. Following a slight decrease of two basis points in June, the rates have now dropped by six basis points. Data shows that the average offer rate was at a similar level in July 2022, maintaining stability since crossing the six percent threshold after the Czech National Bank’s last rate hike.

“Some banks – albeit a few – are attempting to stimulate the holiday mortgage market by reducing interest rates. The range of offers available is quite extensive. However, it would be premature to consider this as a long-term trend. Despite minor fluctuations, the Swiss Life Hypoindex has remained relatively constant for several consecutive months,” commented Jiří Sýkora, a mortgage analyst at Swiss Life Select.

Sýkora further added, “The rates are expected to remain stagnant, with no substantial changes anticipated until the end of the year.”

Monthly Mortgage Payments Decrease by 127 CZK

For a mortgage loan of 3.5 million CZK agreed upon with an LTV of up to 80% and a 25-year repayment term, the average monthly payment in July amounts to 23,068 CZK. This represents a decrease of 127 CZK compared to the previous month.

“Mortgage loan repayments are decreasing, mirroring the decline in average offer rates for the second consecutive month. The average monthly mortgage payment has exceeded the threshold of 23,000 CZK for the past twelve months, except for a minor decrease in October of last year,” noted Sýkora.

Varying Mortgage Costs

Mortgages with up to 80% LTV and a five-year fixation have now dropped below the six percent threshold, reaching precisely 5.99%. The most significant decrease of 0.16 percentage points was observed in mortgages with a three-year fixation and an LTV of up to 80%, with banks offering them at an average rate of 6.28% per annum. Mortgage rates for one-year fixations stand at 6.61%, a decrease of six basis points. Ten-year fixations have remained stable.

Conversely, mortgages for young borrowers with LTV ratios exceeding 80% have become more expensive in the past month. Data from the Swiss Life Hypoindex reveals that the highest increase was witnessed in mortgage rates with a one-year fixation, rising by 0.1 percentage points to 6.1% per annum. Rates for mortgages with three- and five-year fixations saw a slight increase of one basis point, reaching 6.56% per annum and 6.27% per annum, respectively. Mortgages with ten-year fixations experienced a three-basis-point increase, resulting in a rate of 6.36% per annum.

No Significant Rate Drops Expected

The Czech National Bank has maintained its interest rates unchanged, with the two-week repo rate remaining at 7% for over a year since June 22 of the previous year. Analysts predict that rates will likely remain unchanged at the upcoming meetings, suggesting that more substantial drops in mortgage rates are not expected until the end of this year.

“I believe that rates will remain stagnant, and significant changes are unlikely to occur until the end of this year,” concluded Sýkora.

Article by Prague Forum