Czech mortgage market sees slowdown in September after August surge

Banks and building societies in the Czech Republic issued mortgage loans worth CZK 24.2 billion in September, marking a significant drop of CZK 8.1 billion from the unusually strong performance in August. The year-on-year growth rate also slowed, dropping from an impressive 130 percent in August to 80 percent in September. According to the Czech Banking Association’s Hypomonitor, interest rates for new loans edged slightly down to 4.96 percent, compared to 4.98 percent in August.

The data, compiled from all banks and building societies offering mortgages in the Czech market, suggests that the August spike in demand was driven by upcoming changes to early repayment rules, which took effect in September. “The extraordinary demand for mortgages in August was likely caused by these legal changes,” said Petr Gapko, Chief Economist at Moneta Money Bank. “September’s development is more in line with previous trends, and the mortgage market continues its steady growth, supported by a positive consumer outlook and the gradual decline in interest rates.”

In September, the volume of newly granted mortgages, excluding refinancing, totaled CZK 19.7 billion, a decrease of CZK 6 billion compared to August. The number of new mortgage loans issued stood at 5,232, a similar figure to July but down 20 percent from the August peak. Refinancing activity also dipped following a temporary boost in August, although it remained slightly higher than June and July levels.

“Market rates have risen slightly in recent weeks due to global economic developments, but September’s average interest rate was still the lowest since late 2021,” said Jakub Seidler, Chief Economist at the Czech Banking Association. He predicted a further small decline in mortgage rates in the coming months, barring any major disruptions in the financial markets. “Banks are maintaining buffers to offset potential losses from early repayments, so it’s unlikely we’ll see a significant drop in mortgage rates this year,” added FinGO mortgage specialist Jana Vaisová.

Real estate market activity is closely tied to mortgage trends, with rising interest in property purchases. “The trend of increasing real estate transactions continued in September and October, as more buyers entered the market,” said Michal Macek, owner of Europe Reality Group. He attributed this uptick to decreasing interest rates and the perception that favorable purchasing conditions are starting to fade as prices begin to rise again. Macek expects this trend to persist in the coming months as more buyers move to secure properties before prices increase further.

Source: CTK