Babiš calls Czech banks insatiable as mortgage rates keep rising

Prime Minister Andrej Babiš took aim at banks and their profits in the Chamber of Deputies, saying it is commercial banks that earn the most and behave “insatiably.” The occasion was the promises of the ANO movement, which before the elections pledged cheaper mortgages. That has not happened; rates are rising.

The reason, according to Babiš, is the banks’ insatiability, as well as the fact that the Czech National Bank (CNB) keeps its key rate significantly higher than the European Central Bank. “Who earns the most here, who is the most insatiable? Well, the commercial banks,” he said.

Why mortgages are getting more expensive

It is not only about the CNB’s base rate, which the central bank raised just once this year: in June, by a quarter of a percentage point to 3.5 percent. Babiš would like to see it considerably lower. However, analysts estimate that the key role is played by the movement of longer-term market rates and so-called interest rate swaps, which banks use to price mortgages.

At the same time, CNB Governor Aleš Michl has previously pointed out that domestic banks have high margins on mortgages and want to preserve their profitability. In the first half of this year, the banks’ combined net profit rose 5.5 percent year on year to 71 billion crowns.

Babiš hinted that young people could take out mortgages even without a down payment. Finance Minister Alena Schillerová (ANO) proposed in early October that the state help at least young people through higher tax deductions.

In its policy statement, the government of ANO, Motorists and SPD promised, depending on market developments, state support for mortgage interest when buying a first home for young families with a child under six and for key professions such as medics or police officers. But mortgage rates have risen sharply this year: the average offered rate climbed to 5.79 percent in early October, almost a percentage point higher than in spring. Banks point to rising market rates, which determine the cost of money for lending. This is driven by uncertainty on financial markets and fears of higher inflation, caused above all by the current conflict between the US and Iran and more expensive energy.

A call to cities: move your money to the CNB

Babiš told municipalities, cities and regions to move the 640 billion crowns held in accounts at private banks to accounts at the CNB. “You have enough money, we have a deficit, give it to the state,” the prime minister urged, rejecting the opposition’s warnings about bankruptcy and growing state debt.

He called the debt-to-GDP ratio the key parameter and said that at 44.6 percent it is low. The prime minister devoted part of his speech to criticizing the opposition and former finance minister Miroslav Kalousek, whom he familiarly called “Kalda.” As usual, Babiš used charts to make his points, gradually surrounding the lectern with them, and talked with the finance minister directly from it.

Around Prague guide on the topic: Mortgages in Czechia for foreigners: who can get one and how much of your own money you need

Around Prague, based on reporting by novinky.cz