Slovak mortgage market eases, but housing prices expected to climb

The Slovak mortgage market is showing early signs of relief following the European Central Bank’s recent decision to cut key interest rates. However, analysts warn that this easing could lead to rising property prices, particularly in urban areas.

Peter Horčiak, a financial analyst with the Simplea Group, noted that the ECB’s move to reduce all three benchmark rates by 25 basis points in early March will result in cheaper borrowing conditions for both households and businesses. For prospective homeowners, this could mean access to lower interest rates on new loans. For those with existing mortgages, the decision opens the door to potentially beneficial refinancing options.

“Clients who are waiting for even lower rates may want to reconsider. While further rate cuts could materialize more rapidly in 2025, the impact of ongoing fiscal consolidation is likely to exert upward pressure on property prices,” Horčiak said. “Given these dynamics, now is a sensible time to consider purchasing property.”

He emphasized the importance of preparation and financial resilience for those planning to finance home purchases through a mortgage. “Buying a home is often a once-in-a-lifetime financial decision. It’s essential to build a sufficient buffer to handle unexpected life situations that may affect repayment capacity,” he added.

Horčiak also highlighted state support programs for younger buyers. Slovak residents under the age of 35 may be eligible for mortgage subsidies of up to €100 per month, provided they meet certain criteria. In addition, the State Housing Development Fund offers favorable financing options for young families, helping to ease entry into the housing market.

For clients unable to meet the financial requirements for a mortgage, Horčiak recommends considering rental housing as a short-term alternative. “Paying rent can offer the flexibility needed to build savings and assess one’s ability to eventually manage long-term debt,” he said.

On the topic of refinancing, Horčiak urged caution. “Refinancing can result in significant savings, but it is not suitable for every borrower. Before pursuing this option, clients should explore existing state support measures such as mortgage subsidies. These can reduce monthly payments by up to €150—or €1,800 annually—under the right conditions.”

He also advised borrowers to consult their current lenders about revising interest rates before seeking a new loan from another institution. “Refinancing should only be considered if the new interest rate is at least one percentage point lower than the existing rate,” he stated.

Borrowers should also be aware of additional costs tied to refinancing, including account setup fees at new banks, loan processing charges, and administrative fees related to property registration.

Source: TASR