The mortgage bubble continues to inflate. The overheated housing market is just ahead of the record

Compared to September, the volume of provided mortgages increased by CZK 3.162 billion and by CZK 8.3 billion year-on-year. “With the volume of mortgages provided, the mortgage market is just a step away from the record,” said Fincentrum & Swiss Life Select specialist Jiří Sýkora. Over the last six months, the average mortgage rate has fallen by 0.37 percentage point. It has fallen by almost one percentage point since February last year, he added.

Compared to September this year, the number of mortgages provided increased by almost a thousand to 8,800. Year-on-year, banks arranged more than 1,700 more mortgages.

In the first ten months of the year, banks provided mortgages worth 197.59 billion crowns. Compared to the record year of 2017, this year’s volume of provided mortgages is 11.4 billion crowns higher. Year-on-year, the volume increased by more than 52 billion crowns. In addition, unprecedented interest in mortgages has not subsided in November, according to banks. To set a record for banks, it is enough to provide mortgages worth 28 billion crowns by the end of the year.

The end of the credit moratorium has not yet been signed on mortgage rates, and due to strong competition and the persistently low price of resources, mortgage interest rates may not rise in the coming months. On the other hand, the low price of resources encourages a further slight decline in mortgage rates. The average interest rate on mortgages could thus look below two percent in November, Sýkora estimated.

During October, mortgages were reduced by the ČSOB Group, Air Bank, Fio Banka, Raiffeisenbank and Česká spořitelna. At the beginning of November, Creditas Bank joined them. According to the Hypoindex, only large banks Česká spořitelna, ČSOB, Komerční banka and Raiffeisenbank offer rates above two percent for five-year fixations.

The decrease in the average rate may be mainly due to the popularity of shorter fixations, said Bidli analyst Daniel Horňák. Clients thus choose a cheaper mortgage at the same time as a shorter fixation period. Clients who take out mortgages today do not feel threatened by the loss of income, work in stable sectors, have a high income and the purchase of real estate is their security in uncertain times.

“The mortgage business today is operating in a bubble, where there is no sign of a crisis, reluctance to borrow or a significant decline in the ability to repay already obtained loans,” he said.

Raiffeisenbank’s director of mortgage loans, Milan Voldrich, reminded that the increased interest in mortgage refinancing is beginning to be confirmed. While in June, purchase and construction, ie primary needs, accounted for 82 percent of all mortgages, in October it was only 69 percent. According to him, total record sales are increasingly affected by the high volume of mortgages transferred from one bank to another.

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