2015 record year for Czech mortgage market

Photo: Jiří Němec

2015 was a record year for Czech Republic’s mortgage market, with the number of fresh contracts signed and the volume loaned reaching unprecedented highs, according to figures released by market monitors Fincentrum.

Photo: Jiří Němec
Last year almost 105,000 clients signed on the dotted line – nine thousand more than in the previous record year, 2013.

The volume borrowed jumped more dramatically, from CZK 156 billion three years ago to CZK 190 billion in 2015, said Fincentrum, which has been tracking the market since 2003.

The upswing has been attributed to record low interest rates and various special offers and discounts on the part of lenders.

The high numbers were achieved despite a first quarter that offered no indications 2015 would see records smashed.

However, after the first three months of the year home buyers began visiting banks in droves. June was the single busiest month for lenders, with close to 11,000 mortgages (almost twice as many as in January) being inked at a value of almost CZK 20 billion.

Fincentrum’s chief economist Josef Rajdl told the Czech News Agency that the high volume of mortgage loans last year was generated by new mortgages. Refinancing accounted for around 16 percent of that total according to his company’s estimates.

The record volume was not just down to clients’ wish to secure housing for themselves; more and more people in the Czech Republic are acquiring second properties to rent out, Mr. Rajdl said.

Whereas the average interest rate in 2014 had been 2.7 percent, last year it fell to as little as 2.14 percent. The lowest rate – 2.05 percent – was recorded in June.

The average amount borrowed was also noteworthy. In December the figure was CZK 1.91 million crowns. This was the second highest average after December 2007: CZK 1.95 million. In those days the average interest rate stood at 5.3 percent.

In view of the low interest rates, customers took higher and higher loans. The fact many experts thought the rate would start to climb by the end of the year played into this, keeping the buyers coming.

However, such expectations have not come to pass and rates remain low, Mr. Rajdl pointed out.

Jan Sadil of Hypoteční banka said the increase in demand for mortgages had been stimulated by a good mood prevailing in the market that had been supported by record low interest rates, property prices rising slowly and – last but not least – an increase in supply of new apartment complexes.

And the good news may not be over: Experts expect this year to see even better figures.

Demand for property and mortgages sped up even further at the end of 2015 thanks to the strong economy and this year is sure to see even higher numbers, said Jiří Paták of the Chytrý Honza group.

Interest rates are likely to remain low while most companies will give employees pay rises in 2016, Mr. Paták added.