Central bank: Czech households deeper in debt

Foto: Barbora Němcová

Czech households’ debt increased in May by over 43 billion crowns annually, amounting now to over 1.2 trillion crowns, according to figures released by the Czech National Bank on Monday. Analysts say record low mortgage rates have been a major factor in the increase in households’ debt.

Photo: Barbora Kmentová
In total, Czech households owed banks and credit companies 1.218 trillion crowns in May, the Czech central bank said on Monday. The debt rose by 4.65 billion crowns compared to the previous month; however, in comparison with the same month last year, the debt increased by over 43 billion crowns.

Analysts believe record low mortgage rates have played a significant role in the surge. “The fact is the increase in Czech households’ debt has been for the most part due to new mortgages which means it’s a relatively safe debt,” Pavel Kříž of the consultancy PwC’s Czech branch told the news agency ČTK on Monday.

The debt burden of the corporate sector, meanwhile, rose by 2.7 billion crowns month-on-month in May, reaching a total of 996.8 billion crowns. Annually, the debt rose by 38 billion crowns. This suggests that after years of declining interest, banks are now more willing to lend, according to PwC’s Pavel Kříž. “Many Czech firms were saving over the past several years, and now they have relatively a lot of cash, and some of them don’t even need credit”, added Mr Kříž, “Banks now compete for healthy, reliable debtors,” he commented.

On the other hand, Czechs credit with banks and financial institutions showed a mixed trend. One-day deposits of households stood at 1.286 trillion crowns in May, up by 9.42 billion in April alone, and stood at 102 billion more than in the same month last year. But some 324.4 billion was deposited on accounts with notice periods, down by 3.7 billion compared to April and by 16.88 billion compared to last May.