“Czechs’ Debt Rises to Over Three Trillion Crowns, with Long-Term Loans Leading the Way”

Czechs most often borrow for mortgages and housing loans. “Such loans make up 80 percent of the debt. It is a significant part even though the mortgage market is very stagnant at the moment. A smaller part, i.e. less than 20 percent, is short-term loans,” explains Jiří Rajl, executive director of the Non-Banking Register of Client Information.

Czechs therefore give greater preference to longer-term loans than short-term ones. According to Rajlo, this is a long-lasting trend.

“Housing loans had their biggest peak in 2020 and 2021. Now the credit market is stagnating and the amount of short-term loans is increasing. People take out short-term loans most often for the purchase of new and used cars. And then it’s also a combination of mortgage loans with a short-term loan for equipment or for small household repairs and equipment. Then there are also loans that they take out, for example, to buy various consumer goods,” says Rajl.

The volume of unpaid debt rose year-on-year. It is the first time in the monitored ten years that there has been an annual increase in the volume of debt. Two factors are involved.

“What happened was that mortgages were always doing well, and at this point there was a very significant slowdown in the reduction of NPLs. If we look at this amount quarter-on-quarter, there has been an increase in the amount. That’s the first thing. And the second thing is that the amount of threatened short-term debt is increasing for the umpteenth time,” describes Rajl.

‘The trend is reversing’

As a rule, younger residents under the age of 30 had the biggest problems with repayment, followed by the oldest age category over 55. This trend is now reversing. Residents in the productive age of around 30 to 35 start to have the biggest problem. This is because it is the group that has the largest volume of mortgage loans.

“What’s happening is that for the biggest volume that people were taking around 2019 or 2018, they’re now ending their three- or five-year lock-in and significantly change installments. Now they don’t have interest rates around two percent like they used to. Repayments are increasing significantly. Of course, higher energy costs and other installments are also added to this households must pay. They get into financial trouble. And it is also reflected in our statistics,” adds Rajl.

It can be expected that the amount of outstanding debt will continue to grow.

“Already last year, we estimated that the amount of unpaid debt would start to grow. We think that there will be an increase in this amount. We have already crossed the bottom of the outstanding debt and now the amount will start to increase,” concludes Rajl.

Aneta Nevšímalová

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