Mortgage lending in the Czech Republic gained momentum in March as banks and building societies issued loans worth CZK 32.8 billion, marking a 29 percent increase compared to February. New loans excluding refinancing reached CZK 27.2 billion, also showing similar growth. The figures come from the Czech Banking Association’s Hypomonitor report, which includes data from all institutions active in the mortgage market. The rise in mortgage activity was supported by promotional offers launched in February by several banks, with most contracts signed in March. According to Ondřej Šuchman, mortgage manager at Komerční banka, these offers contributed to stronger sales performance. He added that demand for home ownership continues to grow despite only a slight decrease in interest rates. The number of new mortgages issued in March rose to 6,680, representing a 47 percent increase compared to the same month last year. Refinanced loans, either within the same bank or between institutions, also climbed to CZK 5.7 billion, up 45 percent from the monthly average in 2024. Interest rates showed a minor decline in March, with the average for new mortgages falling from 4.72 to 4.68 percent. This brought the average rate 0.51 percentage points lower than it was a year earlier. As a result, monthly mortgage payments for an average loan dropped by about CZK 1,200, reducing repayment burdens by around 1.4 percent of net income. Jaromír Šindel, chief economist at the Czech Banking Association, noted that while the drop in rates is encouraging, inflationary pressure—particularly from services—could influence the Czech National Bank’s approach. He added that if conditions allow, mortgage rates could fall further to around 4.25 percent in the second half of the year. The average size of newly issued mortgages also grew slightly in March to CZK 4.07 million, an increase of nearly two percent month-on-month and 19 percent higher than a year ago. This reflects the combined effect of rising property prices, higher wages, and gradually easing interest rates. In historical context, current mortgage rates remain significantly higher than pre-pandemic levels. Compared to an average rate of 2.8 percent in 2019, the refinancing rate of 4.66 percent translates to an increase in monthly payments by over CZK 1,800, roughly 3.8 percent of the average gross wage. Despite only a modest month-on-month decrease of 0.04 percentage points in rates, analysts are watching closely for further developments. Jan Sadil of the JRD Group commented that recent downward trends in long-term interest rates could impact future mortgage pricing if they continue. David Krůta, a consultant at 4fin, observed that the market is currently experiencing a typical spring revival, largely supported by promotional campaigns. While interest rates are easing only gradually, he noted that banks are introducing offers focused on three-year fixed rates, which remain the most popular among clients. Some banks have launched spring incentives including free property appraisals, discounts on insurance, and preferential conditions for green loans. Although uncertainty on global markets continues to limit the pace of rate cuts, current mortgage activity reflects a growing appetite for home financing in an environment of slightly improving affordability. Source: CTK