The average mortgage rate at the beginning of May fell slightly from April’s 5.57 percent to 5.52 percent. It is the lowest since May 2022. This is according to data from the Swiss Life Hypoindex, which is processed on the basis of bid rates at the beginning of each month. The methodology reflects the current average mortgage loan offer rate for 80 percent of the property’s value.
While the Czech National Bank reduced the two-week repo rate by 1.5 percentage points this year, the bank’s interest rate on mortgage loans according to the Swiss Life Hypoindex by half a percentage point.
“At its May meeting, the CNB reduced the two-week repo rate by another half of a percentage point to 5.25 percent,” said Swiss Life Select analyst Jiří Sýkora. Banks nevertheless maintain the established trend of a slight decrease in interest rates. According to him, this pace is also caused by the fact that banks create a ‘cushion’ for cases where the client pays off the loan early. These situations are addressed by an amendment to the Act on Consumer Credit, which introduced a ceiling for the fee for early repayment.
The monthly repayment of a mortgage loan for 3.5 million crowns arranged up to 80 percent of the estimated value of the property (LTV) with a maturity of 25 years and an average offer rate of 5.52 percent was 21,540 crowns in May. It fell by 90 crowns month-on-month, roughly by a thousand crowns since the beginning of the year.
Some rates again above six percent
In April, for the first time in two years, interest rates for all fixed rates fell below six percent, but this is no longer the case. For a ten-year fixation above 80 percent LTV, the rate rose to 6.01 percent in May. The rate for a ten-year fixation under 80 percent LTV also rose slightly, from 5.77 to 5.82 percent. The rates for three- and five-year fixed rates above 80 percent also went up. The others fell slightly, the most advantageous is now a three-year fixation under 80 percent LTV with 5.25 percent.
A week ago, the CNB presented a new macroeconomic forecast, which, compared to the February version, predicts slightly lower inflation this year and, on the contrary, higher economic growth this year and next. A significant change related to the forecast for the development of interest rates, when the new one expects rates of around four percent at the beginning of next year, while it was 2.5 percent until now, pointed out Sýkora.
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“With the increasing threat of the return of higher inflation in the USA, the price of sources for three- and five-year fixations is rising in the Czech Republic as well,” said the regional director of 4fin Vratislav Jůza. Even though the prices of resources are approximately 0.7 percent higher in the last two months, banks do not reflect them in the interest rates for end clients. They are reducing their interest margins, which at the beginning of this year were the highest in ten years. That is why banks are not offering such high individual interest discounts now as in mid-March, he added.
FinGO mortgage specialist Jana Vaisová Despite the recent drop in interest rates, the CNB does not expect a sharp reduction in interest rates for mortgage loans. “We are still waiting for the bank’s response. Rather, financial houses try to favor mortgage rates with discounts for their other product, such as bank insurance, closing and repayment from a bank account or offering free estimates,” she pointed out.
