Czech mortgage rates climb to 5.79%, the highest since 2024

The average mortgage rate offered in Czechia reached 5.79% per annum in early October — up 0.28 percentage points from a month earlier and the highest level since January 2024. That is according to the Swiss Life Hypoindex, which tracks the country's mortgage market conditions every month.

Banks last raised rates this fast right after the war in Ukraine began. At the same time, it was cheaper mortgages that the ANO movement — now in power — promised ahead of last year's Chamber of Deputies elections. “Cheaper mortgages were a simple, easily sellable promise. Today politicians' answers are evasive: sometimes the banks are to blame, sometimes the Czech National Bank, sometimes the global situation. Responsibility for their own promises is disappearing from the debate,” said Tomáš Kadeřábek of Swiss Life Select, which compiles the index.

Payments are rising, and housing isn't getting more affordable

Rising mortgage costs have already begun to slow the growth in apartment prices, but that doesn't mean housing will become more affordable. “I can imagine that we won't even notice this change,” says Česká spořitelna economist Michal Skořepa.

The monthly payment on a model loan of 3.5 million crowns over 25 years rose by 575 crowns between September and October. And since late February, when the conflict in Iran began, it has increased by 1,854 crowns — to 22,095 crowns. Experts don't expect rates to fall across the board. “Further moderate increases are more likely,” Kadeřábek added. Mortgage costs depend above all on the rates at which banks lend to each other: for the most popular three-year fixations, they stood at around 3.4% before the war and are now at 4.8%.

A good rate comes with a catch

Those looking to take out a mortgage can get a lower rate by choosing a one-year fixation instead of a three-year one. But that move is risky: if rates keep rising next year too, borrowers could end up paying more than if they had locked in a longer fixation now.

Rising rates are unwelcome not only for new homebuyers but also for those already paying off a mortgage whose fixation period ends this year or next. Tens of thousands of households will have to negotiate with their bank in the coming months. Some took out their mortgages back when rates were extremely low, around two percent, while others have rates of three to four percent. For a significant share of these families, monthly costs could rise by thousands of crowns.

Experts advise not to delay negotiating a new rate. “A client who starts comparing offers several months before the fixation period ends can get a much stronger negotiating position,” said Jiří Sýkora, a mortgage analyst at Swiss Life Select. As interest in new mortgages declines, banks may compete more actively for exactly these clients — giving borrowers a chance to negotiate a better rate. Czech banks currently most often offer new mortgages with a three-year fixation at around 5.5%. Only Fio Banka and Moneta Money Bank remain below five percent: smaller banks are still willing to sacrifice a large part of their margin due to competition, but they too are gradually raising their rates.

Apartment prices are rising more slowly

Rising mortgage costs have already reduced client interest in new loans in recent months: in August, banks and building societies issued 26.8 billion crowns in new loans excluding refinancing — 13% less than in July.

The decline in mortgage demand is starting to show up in the apartment market too. In the third quarter, asking prices in most regions stayed at second-quarter levels, and where they did rise, it was usually only by 0.5%. That's according to data from Sreality.cz, the largest Czech real estate listings portal.

“Apartment prices aren't falling, but their growth is quickly returning to more normal levels,” said realtor Iztok Toplak, who analyzed actual sale price trends using data from the company Valuo. The slowdown is visible here too: last summer prices were rising 15% year-on-year, by early this year that had dropped to around 9%, and in August it was about 2.9%.

In Prague — the country's largest real estate market — asking prices even fell by 0.5% between the second and third quarters. But owning a home still remains very expensive: in September, sellers were asking an average of almost 11.5 million crowns for a model 70 m² apartment. According to the wellbeing and financial health index compiled by Česká spořitelna together with the “Europe in Data” project, housing in Czechia remains the least affordable in the European Union: buying an average apartment here requires 13.3 years of income.

Read also: Mortgages in Czechia for foreigners: who qualifies and how much you need in savings

Source: novinky.cz