Czechs hoping for a significant drop in mortgage rates have been left disappointed as rates continue to hover between five and six percent, despite a recent decrease. The anticipation of lower rates has been particularly keen among individuals aiming to purchase their own homes or those whose fixed-rate mortgages have recently ended, resulting in sudden and substantial rate increases to six or seven percent.

According to Swiss Life Hypoindex, the average mortgage offer in September declined slightly to 6.1 percent from August’s 6.19 percent. However, the Czech National Bank has maintained its interest rate at seven percent and does not have plans for an imminent reduction.

While certain banks have introduced traditional discounts following the summer, these offers remain time-limited. Jiří Sýkora from Swiss Life Select pointed out that the average mortgage offer still exceeds six percent. Nevertheless, some banks do provide mortgage options with rates nearly one percent lower.

Among the available mortgage options, those with a three-year fixed rate are the most affordable. The average rate for mortgages covering up to 80 percent of the property’s value (LTV) dropped to 6.04 percent, while mortgages designed for young borrowers up to 36 years old with an LTV above 80 percent decreased to 6.33 percent.

Mortgages with a ten-year fixed rate and an LTV of up to 80 percent have dipped below the six percent threshold for the first time since October of the previous year, standing at 5.95 percent.

While the recent decrease in mortgage rates is positive news for potential property buyers and those looking to refinance, experts caution against expecting an immediate real estate market boom. The average mortgage rate remains relatively high, and the Czech National Bank does not have plans for significant interest rate reductions in the near future.

As mortgage rates decrease, experts anticipate that the correction in real estate prices will likely come to a halt. Instead, prices are expected to resume their upward trajectory, particularly in sought-after locations like major cities or mountain apartments. However, it’s worth noting that certain types of properties have not experienced price declines at all, as indicated by ČSOB, which reported a nearly sixteen percent year-on-year increase in building plot prices.

Article by Prague Forum