On the brink of a mortgage revolution. After a year and a half, the rates fell
“The reduction is primarily due to promotional mortgage offers by some banks. So far, according to our estimates from previous months, the market and mortgage interest rates are more or less stagnant,” said Jiří Sýkora, mortgage analyst at Fincentrum & Swiss Life Select. The average mortgage rate fell from 6.28 to 6.23 percent in September.
Meanwhile, according to data from the Czech National Bank, average mortgage rates last fell last March. Then, together with the tightening of monetary policy by central banks, they rose steadily until this year’s holidays.
However, some of the market players are talking about releasing rates earlier, rather in the case of those interested in new buildings. “Already during the summer, we saw a reduction in interest rates by half a percent, and I believe that this trend will continue in the fall,” says YIT Stavo business director Dana Bartoňová. Battles for clients are fought between bankers mainly in the area of above-average loans.
“Due to the declining volumes of mortgages provided, the business strategy of banks plays a role in pricing, i.e. the competitive environment is charging clients, banks are starting to vie for them,” says Jan Brejl, business director of the consulting company Partners.
According to the Fincentrum Hypoindex, the rates for five-year fixed rates are decreasing the most, by 0.07 percentage point to 5.94 percent. On the contrary, mortgages above eighty percent of the estimated real estate price, which are intended for young people under 36 years of age, have become more expensive.
“Currently, banks have no reason to raise prices, nor to significantly lower prices, the price of resources is borderline for them. We will close the third quarter at the current rates, which could be a few special offers, but rather for a longer fixation,” predicts the head of Golem Finance Libor Ostatek, adding that even the end of the year the price should not rise significantly in either direction. “However, it is very fragile, because in our opinion the pressure to increase rates will be enormous,” adds Ostatek.
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The Czechia will also enter 2023 with relatively high rates, while the horizon of more significant mortgage discounting is not yet in sight. “The further development of mortgage rates will depend on the development of inflation and the reaction of the CNB. I expect that if the base rate of the CNB does not increase by more than half a percentage point, mortgage rates will remain around the current level, and certainly for a longer period of time,” says economist and partner of PwC consulting company Petr Kříž.
Crucial milestones will be the verdicts of the CNB, which will decide on the next development of the base rate at the end of September. At the same time, the basic scenario of the new macroeconomic forecast shows that the central bank under the leadership of Aleš Michl would not have to continue raising interest rates even at the next meetings. “However, the Banking Council is very likely not to go down the path of lowering the base rates yet,” confirms Sýkor’s bet on stability.
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However, economists remind us that the mortgage business is dying for the apartment, not only because of high rates, but also because of the stuck real estate market and economic prospects. It is only a matter of time before mortgage prices become closer to economic reality. “We are in a situation where, for the vast majority of the population, the solution to own housing through a mortgage loan is almost unrealistic,” recalls DaVinci Investments fund partner Vlastimil Bijota, adding that he expects a gradual decrease in rates in the foreseeable future.