Czech mortgage rates are nearing 6% as banks raise fixed offers

Mortgages in Czechia are getting more expensive again: at two major banks, ČSOB and Komerční banka, the rate on a three-year fixation is already 5.94%, just under the psychological 6% mark. According to a survey of bank offers on Oct. 27, most banks are charging between 5.5% and 5.7%.

The market is pushing rates up

Mortgage rates depend largely on interbank rates. For loans with a three-year fixation they now stand at around 4.9%, which is 1.5 percentage points higher than at the end of February, when the conflict broke out. Dominik Rusinko, chief economist at Patria Finance, warns that if market rates stay at their current level, the average rate on new mortgages will approach 6%.

Experts say competition has so far held back price increases, and banks have not yet passed the higher rates fully on to clients. The most expensive mortgages are now 1.1 points pricier than in February.

For comparison, we took a typical loan: CZK 4.67 million, 80% of the property value, a 30-year term and a three-year fixation. Here are the banks’ rates as of Oct. 27 (according to the banks’ price lists): Fio banka — 4.78%, Moneta Money Bank — 4.79%, Air Bank and UniCredit Bank — 5.39% each, Raiffeisenbank — 5.54%, mBank — 5.59%, Česká spořitelna and Partners Banka — 5.69% each, ČSOB and Komerční banka — 5.94% each.

Who will be hit hardest

It is bad news not only for those planning to take out a loan, but also for those whose fixation is ending. Tens of thousands of families face this at the end of this year and next year. Although these are mostly no longer loans from the era of rates around 2%, the jump may still be significant: on an average mortgage of CZK 4.67 million, a one-point rise in the rate means almost CZK 3,000 more per month.

Expensive loans are already slowing price growth on the secondary housing market: there are fewer buyers and selling is harder. According to Hendrik Meyer, head of the EHS real estate group, which includes the Bezrealitky service, owners who decide to sell face a choice: agree to a lower price than they expected, or take down the listing and rent out the apartment.

Politics and inflation

Mortgages are getting costlier despite the ruling ANO movement’s pre-election promises to make housing loans cheaper. The government has promised tax breaks on mortgages for young people. At a budget discussion, Prime Minister Andrej Babiš said high rates bring profits to commercial banks, called them insatiable and said he intends to talk to them.

There is also a flip side: expensive loans may help bring down inflation. In past years it was driven by huge interest in real estate, which pushed apartment prices up at double-digit rates. Experts do not expect prices to fall across the board, but housing price growth will most likely slow noticeably.

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Around Prague, based on reporting by novinky.cz