Czech mortgage market grows 13% in February as interest rates continue to decline

In February, banks and building societies in the Czech Republic provided mortgages totaling CZK 25.5 billion, marking a 13 percent increase compared to January. New loans without refinancing followed the same growth trend, reaching CZK 21.1 billion. Meanwhile, interest rates continued their gradual decline, dropping from an average of 4.78 percent in January to 4.72 percent in February. These figures come from the Czech Banking Association Hypomonitor, which compiles data from all banks and savings banks offering mortgages in the country.

On a year-on-year basis, mortgage growth slowed slightly in February. While the annual increase in January was 72 percent, it fell to 62 percent in February. The number of new mortgages issued during the month rose to 5,277, representing a 37 percent increase compared to the previous year. According to Jaromír Šindel, the chief economist of the association, the mortgage market maintained strong momentum in February, with growth driven not only by the usual seasonal recovery but also by a rise in the average mortgage amount and a modest increase in the number of new loans.

Refinanced mortgages, whether internal or transferred from other institutions, increased by ten percent year-on-year, amounting to CZK 4.3 billion in February. The continued decline in interest rates reinforced a downward trend that brought mortgage rates below five percent, a level last seen in July 2024. February’s average interest rate was 0.64 percentage points lower than a year ago, reducing monthly mortgage repayments by approximately 1.7 percent of the applicant’s net income, or roughly CZK 1,500.

February’s month-on-month decline in mortgage rates was among the most significant since April 2024. Šindel noted that competition among banks is likely to push rates down further, though developments in market interest rates within the Czech Republic and the eurozone could slow this process. While the Czech National Bank resumed lowering its benchmark interest rate in February, longer-term market rates have remained relatively stable since last autumn, influenced by factors such as inflation trends, economic outlooks, and monetary policy dynamics.

The average newly issued mortgage in February increased slightly to CZK 4 million, reflecting a two percent rise from January and an 18 percent increase compared to the previous year. This growth reflects a combination of rising property prices, wage increases, and declining interest rates.

Compared to 2024, the combination of lower interest rates and higher average mortgage values in early 2025 led to an increase of CZK 1,100 in average monthly mortgage payments. A 0.4 percentage point decline in interest rates from their 2024 average of 5.07 percent reduced monthly payments by more than CZK 800, bringing the average repayment for a standard 26.5-year mortgage to CZK 22,100. This adjustment accounts for approximately 0.9 percent of the applicant’s net income, compared to the average repayment last year.

According to Jan Sadil, director of the JRD group, the Czech public’s desire for homeownership remains strong. After a period of hesitation caused by high mortgage rates, demand that had been postponed is now returning to the market. He linked this revival to interest rates falling below five percent.

David Krůta, a consultant at 4fin, believes that competition among banks may push rates slightly lower, but he does not expect a significant decline. He described the market’s recovery as gradual rather than sudden, with a large portion of potential buyers still waiting for better conditions. Mortgage specialist Jana Vaisová noted that many homeowners are currently holding off on refinancing older mortgages that had rates around two percent. Now, they are faced with renewal options starting at approximately 4.5 percent, leading some to delay their decision.

Source: CTK