Czech banks and building societies witnessed a significant downturn in the mortgage market last year, providing loans amounting to 150 billion crowns, reflecting a nearly 24% year-on-year decline. New loans, excluding refinancing, stood at 124 billion crowns. The latest data, sourced from the Czech Banking Association Hypomonitor, indicates a decrease in interest rates in December, dropping to 5.65%, the lowest level since mid-2022, from 5.67% in November.

Jakub Seidler, Chief Economist of the Czech Banking Association, expressed that the mortgage market’s performance in 2023 exceeded initial expectations. The decline in loan provision was attributed to a combination of factors, including the Czech National Bank’s relaxation of income indicator rules, a slight dip in property prices, and a decrease in interest rates. While the market is expected to witness a revival in 2024, reaching double-digit growth for the year, it is anticipated to remain below pre-pandemic levels.

In December, the volume of mortgages provided experienced a seven percent month-on-month decline to 15.1 billion crowns. However, on a year-on-year basis, it marked a substantial 93% increase. Newly provided mortgages, excluding refinancing, amounted to 12.7 billion crowns in December, following November’s 13.4 billion crowns.

Marek Richter, Head of Mortgage Services at Air Bank, highlighted that 2024 is expected to be characterized by declining interest rates and a market revival. This trend, initiated at the end of 2023, is influenced by a gradual drop in the price of resources and prevailing market dynamics.

Despite the positive outlook, mortgage rates, though decreasing, remain above average for the last two decades, comparable to levels observed in 2008 and 2009. The average mortgage in December increased to 3.37 million crowns from 3.21 million crowns, reflecting a return to early 2022 levels. The highest average was recorded in November 2021 at 3.46 million crowns.

Article by Prague Forum