The price of mortgages fell slightly for the first time in a year and a half. How will interest rates continue to develop?

The price of mortgages fell slightly for the first time in a year and a half. How will interest rates continue to develop?
The price of mortgages fell slightly for the first time in a year and a half. How will interest rates continue to develop?

Those interested in owning their own home can finally rejoice after a year and a half. Although only slightly, average mortgage rates finally eased after a consistent sixteen-month rise.

According to the Fincentrum Hypoindex indicator, which monitors the development of the mortgage market at the most important domestic banks, in the first five days of September banks offered mortgages with an interest rate of 6.23 percent compared to 6.28 percent in August. Whether the downward trend will continue will be seen at the end of September.

A good sign is that the average price of mortgages has already slowed down in growth last month, when, according to the Fincentrum Hypoindex, mortgage loans gained an average of only 0.04 percent. “In terms of interest rates, practically nothing has happened in the last month, and this raises a slight hope that the worst is behind us. Two banks have even reduced interest rates,” David Eim, deputy chairman of the board of the consulting company Gepard Finance, told ČTK.

According to Jiří Sýkora, a mortgage analyst at Fincentrum & Swiss Life Select, promotional offers had a positive effect on price developments. “This very slight reduction was mainly caused by the promotional mortgage offers of some banks,” said Fincentrum & Swiss Life Select mortgage analyst Jiří Sýkora.

Interest rates for mortgages up to 80 percent of the appraised value of the property fell according to current data for all fixations. However, they decreased most significantly for mortgages with a five-year fixation, namely by 0.07 percentage point to 5.94 percent. Banks offer mortgages with a one-year fixed rate at an average of 6.52 percent, with a three-year fixed rate at 6.41 percent, and with a ten-year fixed rate at 6.03 percent.

According to Fincentrum Hypoindex, mortgages above 80 percent of the estimated real estate price, which are intended for young people under the age of 36, have become more expensive. The lowest increase was recorded by those with a five-year fixation, whose rates rose to 6.28 percent. A mortgage above 80 percent can be fixed for an average of 6.27 percent, for three years for 6.74 percent and for ten years for 6.36 percent.

The monthly installment of a mortgage loan for 3.5 million crowns agreed up to 80 percent of the estimated price of the real estate with a fixation for three years, a maturity of 25 years and an average offer rate of 6.23 percent, amounts to 23,035 crowns in September. This average mortgage thus fell by approximately 115 crowns per month. “However, at these prices, the drop is so negligible that it has no practical impact on the mortgage market and clients,” added Sýkora.

Despite the drop in September, interest rates are still the highest since the crisis years of 2007 to 2010. Whether it is worth waiting to buy real estate will be decided by the meeting of the banking board of the Czech National Bank at the end of September.

According to Sýkora, however, provisional forecasts show that the CNB would not have to increase the base rate further, but apparently it will not go down the path of lowering either. According to him, mortgage interest rates could also stagnate in the coming periods.

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