Czech mortgages are still getting cheaper, and a record year is within reach

The average interest rate on mortgages has been falling for the fifth month in a row. While the average rate fell by another nine basis points in May and June, in August it fell by only four basis points to 2.11%, according to the Fincentrum Hypoindex.

In August, banks provided 6,868 mortgages for 19.173 billion CZK. Although the volume of mortgages provided fell by almost 2.5 billion CZK compared to July, this August became the strongest eighth month in the history of Fincentrum Hypoindex.

“Although the total volume of provided mortgage loans decreased compared to previous months, from a year-on-year point of view this is a result that, with its value of 19.17 billion CZK, determines that this August became the most successful eighth month in the history of Fincentrum Hypoindex,” Jiří Sýkora, a specialist in the product management department of Fincentrum & Swiss Life Select, said in a press release.

If mortgage banks keep the volumes of mortgages provided at the level of the summer months, they could even approach records from 2016 and 2017, when they negotiated mortgages worth more than 225 billion CZK.

Since January 2019, when the average mortgage rate climbed to 3% from historic lows at the end of 2016, the average rate has fallen by 0.89 percentage points. The continuous decline in the average rate since the beginning of last year has been disrupted only by the first quarter of this year, when the average rate rose by 0.1 percentage point over three months.

Rates are unlikely to fall more sharply in the autumn, according to Fincentrum’s analysis of the market. Competition may force some banks to partially reduce mortgage rates. However, the widespread reduction in mortgages has apparently already taken place.