Why Czech Mortgage Rates Are Rising Despite Stable Central Bank Rates
Average mortgage interest rates in the Czech Republic rose for the seventh month, reaching their highest level since early 2024, according to financial data reported by Seznam Zprávy. The rising borrowing costs have driven the average offer rate up to 5.79 percent by October 2026, according to figures from Swiss Life Hypoindex.
Mortgage Loan Volumes Fall 6 Percent Year-On-Year
Commercial banks and building societies issued 35.4 billion crowns in mortgage loans during September, marking a 6 percent decrease compared to the same month in the previous year, according to the Hypomonitor statistics released by the Czech Banking Association. Despite the yearly drop, the total volume rose 3 percent from August. New loans unadjusted for refinancing increased 5 percent month-on-month to 28 billion crowns, while the number of new mortgages climbed 2.9 percent to 5,995.
Refinanced and top-up loans reached 7.5 billion crowns in September, sitting 6 percent above the 2025 average and 91 percent higher than the 2024 average. Refinancing accounted for 21.1 percent of total volume. The average interest rate on refinanced mortgages stood at 5.05 percent—0.55 percentage points higher than the previous year—while new mortgages averaged 5.1 percent, representing a 0.58 percentage-point year-on-year increase from a recent low of 4.43 percent recorded in March.
The Mechanics Behind Rising Mortgage Costs
Alena Schillerová blamed commercial banks for raising rates without justification, as reported by Seznam Zprávy. In response, Schillerová proposed increasing the mortgage interest tax deduction limit by 50,000 crowns for borrowers under the age of 36. Currently, taxpayers can deduct paid interest up to 150,000 crowns annually, or 300,000 crowns for contracts signed before 2021, saving up to 22,500 crowns per year. The proposed increase would raise potential annual tax savings by 7,500 crowns.
Former bankers and financial analysts, however, noted that mortgage rates do not tie directly to the Czech National Bank’s (ČNB) two-week repo rate, which remained unchanged at 3.75 percent. Trinity Bank Chief Economist Lukáš Kovanda explained that mortgages depend on long-term funding sources, primarily three-year interest rate swaps. Czech five-year interest rate swaps rose by 0.35 percentage points in September to average 4.85 percent—their highest 12-month average—exceeding the ČNB base rate because markets price long-term money on expected future central bank policy rather than current settings.
Impact on Borrowers and Property Prices
High interest rates combine with record property values to strain household budgets. An average 2+kk apartment in Prague costs approximately 8.6 million crowns. A buyer securing an 80 percent mortgage of 6.88 million crowns at a 5.79 percent interest rate over a 30-year term faces a monthly payment exceeding 40,300 crowns, resulting in a total repayment of 14.5 million crowns—with roughly 7.6 million crowns paid in interest alone, surpassing the initial principal.
Vilém Mádr, product manager at Česká spořitelna, stated that the real estate market is experiencing a slight cooling in demand for investment properties due to the high-rate environment. To manage the pressure, Česká spořitelna recommends clients consider shorter, two-year fixations to gain time for market stabilization before future refixation. Meanwhile, the ČNB continues monitoring accelerating inflation, which risks keeping borrowing costs elevated.