The development of mortgage interest rates in the Czech Republic in 2025 is causing mixed reactions. While experts expect a slight decline, the momentum is significantly lower than in previous years. Banks could be pleased to see an increase in interest in new loans, but this could pose a challenge for prospective buyers in view of high property prices.
“I expect interest rates to fall by a few tenths of a percentage point early this year or by spring at the latest, as the mortgage market gains momentum. However, with inflation rising again, we can expect rates to stagnate or decrease very slowly for the remainder of the year,” says Jiří Sýkora, a specialist in the Product Management department at Swiss Life Select.
If these forecasts prove accurate, monthly repayments for new mortgages and those with expiring fixed interest rates would decrease. This could also spark renewed interest in mortgages. “This development is certainly welcome news for banks but less so for prospective buyers. Increased demand often correlates with rising property prices, which, at current levels, is not encouraging for buyers,” Sýkora adds.
Current Mortgage Rates Average 5.13% per Year
According to the Swiss Life Mortgage Index, the average offer rate for mortgage loans stood at 5.13% as of 6 January 2025. This marks a decline from December 2024, when the rate was 5.22%. The nine-basis-point drop over the month is significant, considering the broader trends observed over the past year. The decrease is largely attributable to decisions by the three largest banks to significantly reduce their mortgage rates at the close of 2024.
Mortgage rates are expected to continue their downward trend in 2025, albeit more slowly than many bank customers might hope. Persisting inflation concerns, which remain unresolved, are a key factor. The Czech National Bank (CNB) forecasts an inflation rate of 2.6% for 2025, slightly above its 2% target.
For a mortgage loan of CZK 3.5 million, covering up to 80% of the estimated property value (LTV), with a 25-year term and the current average offer rate of 5.13% p.a., the monthly repayment in January amounts to CZK 20,730. This represents a decrease of approximately CZK 1,000 compared to the same period last year.
The Swiss Life Mortgage Index tracks the current average offer rate for mortgages with a loan-to-value ratio of up to 80%. The data is released on the fifth working day of each month.
