The trend of decreasing mortgage rates persists, albeit modestly, according to the latest data from the Swiss Life Hypoindex. Over the past month, the average interest rate has edged down by four-hundredths of a percentage point, settling at 6.01%. Despite this marginal decline, analysts suggest that the reduction is primarily cosmetic, with mortgage rates displaying overall stagnation.

Jiří Sýkora, a Swiss Life analyst, attributes the marginal decrease to a short-term offer from one of the banks. He notes that while the most significant drop was observed in mortgages fixed for three years, averaging a 0.13 percentage point decrease, the overall landscape of mortgage rates remains relatively stable. The interest rates for three-year fixed mortgages for 80% of the property value have now reached 5.91%, and for young people’s mortgages, they stand at 6.26%.

This adjustment aligns three-year fixes with the existing five and ten-year fixed mortgages, which have been available under the six percent threshold since July. However, there is an anomaly in the trend, as mortgages fixed for one year have experienced a slight increase of three-hundredths of a percentage point on average. Currently, these one-year fixed mortgages are the most expensive on the market, with interest rates of 6.04% for young borrowers and 6.46% for others.

The monthly loan payment for a mortgage of 3.5 million crowns, covering up to 80% of the property price with a 25-year maturity at the current average rate of 6.01%, has decreased by 68 crowns to 22,582 crowns.

Looking ahead, the mortgage market is anticipating the Czech National Bank’s decision on the base interest rate, which serves as a benchmark for commercial bank products. Analysts suggest that a potential decrease may be on the horizon, with the Czech National Bank signaling a likely adjustment in December. The timing of the banks’ response to this change remains uncertain, with some speculating whether they will implement a rate decrease as a year-end benefit to clients or wait until the commencement of the mortgage market in early 2024.

Article by Prague Forum