The two largest domestic banks have announced that mortgage loans are becoming more expensive. The reason is rising resource prices on the interbank market. The availability of housing will thus worsen even more, people will be able to repay the loan all their working lives. On the other hand, overheated housing prices could gradually cool down.
Both Česká spořitelna and ČSOB are raising mortgage interest rates by 0.2 percent. According to both banks, the main reason is the price of resources, which is constantly rising and has an impact on mortgage market rates.
At Česká spořitelna, the interest rate on the most popular fixations for 5 and 8 years at a rate of 2.74% per year will start at 2 September. At ČSOB, the interest rate on the most common mortgage with a 5-year fixation will start at 2.69% from 13 September.
“The era of low interest rates on mortgages is coming to an end, and in the coming months we expect that the rate of housing loans and real estate prices will gradually rise. If we add the sharp increase in building materials, it is clear that the availability of new housing will deteriorate significantly in the coming months. That is why we want to look for solutions in cooperation with the regulator and other banks to help clients obtain a loan. One of the ways may be to postpone the length of the mortgage for a period longer than 30 years, “said Filip Belant, head of the Housing section at Česká spořitelna.
The most common mortgage repayment period is currently just 25 to 30 years, which is agreed for 56 percent of all mortgages provided. So far, banks have been reluctant to approve longer repayment periods. If the maximum repayment period is shifted, it will mean that people will spend almost their entire working lives in debt due to housing.
On the other hand, this could discourage many people interested in mortgages, and with a drop in demand, pressure could ease the continued rise in apartment prices. Currently available mortgages are one of the factors in rising housing prices, as it pays for many people to buy an apartment “for investment”.
According to a ČSOB press release, the rate hike reflects the CNB’s repeated and expected rate hikes in the future. At the beginning of August, it raised key interest rates to 0.75 percent for the second time this year due to rising inflation.
“The mortgage market has shown record results in the last two years. One of the reasons was the very low rates, which attracted many people interested in their own housing, refinancing of previously granted loans and investors. Recently, however, the development of credit rates has not been in line with the increase in resources on the interbank market, so the upward adjustment of rates is no big surprise. Despite the increase, interest rates remain low below three percent, ”explains Jan Sadil, a member of the ČSOB Board of Directors.
The Bank anticipates that higher rates on new loans will logically reduce clients’ interest in refinancing, and thus the total volume of new loans will fall slightly.
According to experts, it can be assumed that other banks will continue to raise interest rates.
“Interest rates will rise this year as the Czech National Bank raises the key interest rate. So far, the average rate of mortgages has been lower than 0.1 percentage point per month in recent months, but it cannot be ruled out that at the end of the year the average rate on new business could reach 3%, ”comments Miroslav Zámečník, announcing the two largest banks on the Czech market. Chief Advisor to the Czech Banking Association.
According to data from the Fincentrum Hypoindex, which has been monitoring the mortgage market for a long time, the lowest interest rate in the last two years was in February this year, when loans were offered on average 1.93 percent. In March, when interest rates were 1.94 percent, the number of housing loans provided broke all previous records.
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