Czech mortgage market reviving, a fifth of the population plans to buy a new home

A fifth of the Czech population plans to take out a mortgage in the next few years. Czechs are also paying close attention to interest rates and monthly payment amounts. They also expect the repayments to significantly burden their family budget.

Two-thirds of Czechs live in their own home, according to a recent survey by the Czech Banking Association (ČBA) and polling agency Ipsos. A third of the respondents bought the property with a mortgage and a quarter financed it from their own savings.

The latest ČBA Hypomonitor data showed that the mortgage market is starting to revive.

“The mortgage market has been in a significant downturn since the middle of last year, and the number of mortgages negotiated has reached its lowest value in the last two decades,” ČBA chief economist Jakub Seidler said in a press release.

Half of the households planning a mortgage postponed their decision most often due to rising living costs or because they are waiting for more favorable conditions for both real estate prices and interest rates,” he added.

“Although the more favorable March numbers on the mortgage market indicate that mortgage activity is thawing slightly, this year's March volume of granted mortgages was still the lowest since 2014,” he added.

Two years ago, when mortgage rates were about 2 percentage points lower than now and inflation hovered around 3 percent, those interested in a mortgage were primarily guided by the recommendations of financial advisors or their experience of acquaintances.

Today, however, the most important thing for them is the interest rate (46 percent of respondents), the annual percentage rate (33 percent), and the related amount of the monthly installment.

Michal Straka from the Ipsos agency said the findings were quite logical, as Czechs prefer lower monthly installment payments. “Rising living costs and higher interest rates cut a significant part of the family budget. Each percentage of interest affects the amount of the installment,” Straka from the Ipsos agency.

The maximum mortgage amount that Czechs consider is usually CZK 3 million. Over half of them want to finance the purchase of real estate with an amount of up to CZK 600,000. They most often use savings (44 percent) for additional financing, while a fifth use joint financing with their partner. Less than a fifth have savings in a building savings account, and roughly one in six borrows from relatives.

A mortgage represents a significant burden on the family budget. Those already paying off their mortgage usually pay between 20–24 percent of their net monthly household income. For every third household, the repayment represents more than 30 percent of income. For comparison, those who are just planning a mortgage expect to spend more than 40 percent of their net household income on repayments. 

Despite the fact that the prices of apartments and houses have been gradually falling in the recent period, two-fifths of Czechs are convinced that they will rise again in the coming years. But a third has the opposite opinion, according to them, real estate prices will fall.