The average mortgage rate in the Czech Republic fell slightly by 0.07 percentage points to 5.42 percent at the beginning of August compared to the previous month. This data is from the Swiss Life Mortgage Index, which is compiled based on offer rates at the beginning of each month. This means that interest rates are at their lowest level since May last year.
According to the Hypoindex, mortgage rates have fallen by just 0.95 percentage points since their peak of 6.37 percent in February 2023. During the same period, the Czech National Bank lowered its key interest rate by 2.5 percentage points.
“Interest rates for mortgage loans in the Czech Republic remain high. Although the Czech National Bank lowered its key interest rate again in August, this time by a quarter of a percentage point to 4.5 percent, most banks are in no hurry to lower mortgage rates. According to our estimates, mortgage rates could remain above 4.5 percent by the end of the year. In 2025, we could see mortgage rates around 4 percent,” said Tom Kadeřábek, Product Manager at Swiss Life Select.
Kadeřábek explained that the slower pace of mortgage rate cuts is partly due to the fact that banks set their rates according to longer-term interest rates, which are determined by the market.
Jiří Sýkora, a mortgage analyst at Swiss Life Select, added: “The question remains whether banks are cutting rates because they are creating a ‘cushion’ for potential early repayment of loans, which they say they are missing out on due to the low cap on early repayment penalties. Or whether the banks just want to ‘cure’ the years in which interest rates and therefore the banks’ margins were very low.”
The monthly repayment of a mortgage loan of CZK 3.5 million, negotiated up to 80 percent of the estimated property price with a term of 25 years and an average offer rate of 5.42 percent, was CZK 21,326 in August. Since the beginning of this year, this amount has fallen by CZK 1,263.
