Banks and building societies in the Czech Republic granted mortgages totalling 22.6 billion CZK in January, which represents a decline of five percent compared to December. However, at the start of the year, the volume of new mortgages typically drops by a much greater margin. Interest rates continued their slight decline in January, decreasing on average from 4.8 to 4.78 percent.
According to the latest data from the CBA Hypomonitor, banks and building societies granted new mortgage loans amounting to 18.7 billion CZK in January. Additionally, customers refinanced their existing mortgages to the tune of 3.9 billion CZK. Compared to December, mortgage activity dropped by about 5%, though this can partly be attributed to the seasonally weaker start of the year.
“The behaviour of households shows that they are closely monitoring developments in the property market. Prices for flats and houses increased more rapidly last year, and given the limited supply of new building projects, this trend could continue in 2025. Buyers are opting for new-build flats more quickly, as their reluctance could make them more expensive in the coming months. Therefore, interest in mortgages remained strong even in the typically weaker month of January, and sales volumes were solid,” says Martin Vašek, CEO and Chairman of the Board of ČSOB Hypoteční banka.
According to the Banking Association, the reduced average interest rate confirms the downward trend that has been ongoing since July 2024, falling below the five percent mark. Compared to the previous year, the interest rate is 0.74 percentage points lower, which has reduced the monthly mortgage payment by approximately two percent of the applicant’s net income. In 2024, the average mortgage interest rate was 5.07 percent, compared to 5.81 percent in 2023.
Although the Czech National Bank further reduced its key interest rate to 3.75 percent in February, market interest rates for long-term loans have remained at a similar level since last autumn. They are influenced by several factors – not just the central bank’s base rate, but also inflation expectations, economic developments, and exchange rate dynamics.
The average new mortgage granted rose to 3.92 million CZK in January – a 15% increase compared to the same period last year. The reduction in mortgage rates by almost 0.3 percentage points compared to the average rate of 5.07 percent in 2024 led to a decrease in the monthly payment for an average mortgage with a typical 27-year term by nearly 700 CZK, bringing it down to around 21,700 CZK. A mortgage of one million CZK with a 30-year term now costs around 5,200 CZK per month.
