Czech mortgage market sees strong spring growth as interest rates continue to decline

The Czech mortgage market experienced a notable increase in activity in March 2025, supported by a continued decline in interest rates, according to the latest ČBA Hypomonitor report. Banks and building societies issued CZK 27.2 billion in new mortgage loans during the month—a 29% rise compared to February.

The average mortgage interest rate fell slightly to 4.68%, down from 4.72% in February and 5.19% in March 2024. This gradual decline in rates has helped reduce monthly repayments for borrowers by around CZK 1,200, or approximately 1.4% of an applicant’s net income.

The number of new mortgage contracts reached 6,680 in March, up 47% year-on-year. Seasonally adjusted, this represents one of the highest monthly levels recorded over the past three years. Refinanced mortgages—including both external and internal refinancing—amounted to CZK 5.7 billion, contributing to a total mortgage market volume of CZK 32.8 billion for March.

Mortgage Rate Trends

The average mortgage rate of 4.68% in March represents a year-on-year decrease of 0.51 percentage points. Compared to the 2024 average of 5.07% and the 2023 rate of 5.81%, the reduction translates into notable savings for borrowers. However, despite lower interest rates, the rise in average mortgage amounts has pushed up overall monthly repayments. The average mortgage in March was CZK 4.07 million, about 19% higher than in March 2024.

Impact on Monthly Repayments

Due to the higher loan amounts, the average monthly repayment in March rose by approximately CZK 1,300 compared to 2024. For borrowers taking out a CZK 1 million mortgage with a 30-year term, the typical monthly payment at current rates is around CZK 5,200. By comparison, borrowers with similar loans issued in 2019 at rates near 2.8% paid about CZK 1,800 less per month.

Market Outlook

If the momentum of the past two months continues, the volume of new mortgages in 2025 could reach CZK 291 billion, exceeding 2024’s CZK 228 billion by more than 25%. This would place annual mortgage activity at a midpoint between 2020 and the record-setting year of 2021.

Economists warn that future developments will depend heavily on external economic conditions. Petr Gapko, Chief Economist at MONETA Money Bank, noted that uncertainties in global trade policy—particularly U.S. tariffs—could impact future interest rate decisions.

Market interest rates, including three- and five-year swaps, rose slightly in March, partly due to stronger-than-expected inflation in services. Still, Czech interest rate swaps remained about 20 basis points lower in early April, which could create further room for mortgage rates to fall below 4.3% later this year.

Longer-Term Trends

Throughout 2024, the mortgage market rebounded strongly. Banks and building societies issued CZK 228 billion in new loans—an 83% increase compared to 2023. Refinancing added CZK 47 billion, bringing the total mortgage market volume for the year to CZK 275 billion.

Despite the market’s recent strength, the current average mortgage amount is now 11% higher than in 2024, suggesting continued pressure on affordability, even as rates fall.

Source: CBA-Czech Banking Association