Mortgages are at freezing point. A Christmas miracle would help the market

Mortgages are at freezing point. A Christmas miracle would help the market
Mortgages are at freezing point. A Christmas miracle would help the market

The average mortgage offer rate according to the Swiss Life Hypoindex has fallen for the sixth month in a row. Compared to October this year, it fell by four basis points to 6.01 percent. From the perspective of how the interest rate is reflected in the monthly installments, it is practically stagnation.

For example, the monthly installment of a mortgage loan for 3.5 million crowns negotiated up to 80 percent of the estimated price of the property with a maturity of 25 years and an average offer rate of 6.01 percent would be cheaper by 68 crowns to 22,582 crowns.

“Mortgage rates continue to be more or less stagnant, as the drop in the Swiss Life Hypoindex by four basis points, to the current value of 6.01 percent, is a rather cosmetic change. Among other things, it is behind a very short-term offer campaign of one of the banks that make up the Swiss Life Hypoindex. In general, however, banks continue to copy the behavior of the CNB, which at its November meeting again left rates at their current values,” said Jiří Sýkora, mortgage analyst at Swiss Life Select.

Overall, however, according to Jiří Sýkora, the mortgage payment this year has decreased by almost 700 crowns on average.

“The most significant decrease was recorded in March, when the average mortgage offer rate fell by a tenth and the installment became cheaper to 23,131 crowns. However, the mortgage payment did not reach the threshold of 23,000 crowns until August,” says Jiří Sýkora.

Mortgages fixed for three years fell the most significantly

The most significant decrease in interest rates was recorded by mortgages fixed for three years, by an average of 0.13 percentage points. Interest rates for mortgages up to 80 percent of the mortgage value of the property fell to 5.91 percent and for mortgages for young people under 36 to 6.26 percent.

A Christmas present from the CNB?

Behind the trend of stagnant interest rates is the decision of the Banking Council of the Czech National Bank (ČNB), which decided at the beginning of November to leave the base rates unchanged again. The two-week repo rate thus remains at seven percent. The CNB will have the last chance to lower interest rates this year at its monetary policy meeting on December 21.

“The CNB stated that it will most likely reach for a reduction at the next meeting, i.e. in December. However, he points out in advance that this possible reduction will be, at least initially, very gradual. It will then be up to the banks whether they will immediately reflect any reduction in mortgage rates as a Christmas gift to clients, or wait for the reduction until the start of the mortgage market at the beginning of 2024,” comments Sýkora.

If the CNB does indeed proceed to lower the base rate in December, it will probably only be a drop of a quarter of a percentage point, according to experts’ expectations. The base rate could thus drop to 6.75 percent.

Although banks are eagerly anticipating a recovery in the mortgage market, a quarter of a percentage point cut in the prime rate may not have much of an immediate impact on mortgage rates, be it before or after Christmas. According to experts from Swiss Life Select, most banks have already factored in a certain expected drop in mortgage rates. On the other hand, even the slightest impulse from the CNB is good news for the mortgage market, that the period of high rates is ending.

The article is in Czech

Tags: Mortgages freezing point Christmas miracle market


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