Mortgage rates hit record low as Prague property prices reach new high

Photo: Filip Jandourek

The average mortgage rate in the Czech Republic has reached a new record low, falling below the 2.0 percent mark for the first time. At the same time, the price of apartments sold in Prague has hit a fresh high, with the average per square metre cost of properties breaking through the CZK 60,000 barrier.

Photo: Filip Jandourek
The average mortgage rate in March was 1.97 percent, down from 2.02 percent the previous month, according to Fincentrum. The consultancy firm have been monitoring the Czech market since 2003 and do not take into account fixed-rate duration.

Fincentrum analyst Josef Rajdl told the Czech News Agency on Wednesday that mortgage rates were likely to fall even further. Mr. Rajdl said anybody with sufficient income seeking a loan of up to 85 percent of the value of a property for a longer fixed-rate period who was not now being offered less than 1.9 percent was “at a bad bank”.

The good news for borrowers is seen as the result of banks launching a fresh springtime round of mortgage rate reductions in a bid to outdo their competitors.

Roklen analyst Lukáš Kovanda agreed that there is room for a further fall. He said that the loosening of monetary conditions in the Czech Republic and the Eurozone was contributing to the mortgage rates squeeze.

This combined with the increasingly intense competition among domestic banks will lead to a deeper fall below the two percent rate in the next few months, Mr. Kovanda said, adding that both number of mortgages and total volume of loans could reach fresh records in 2016.

The figures show that the mortgage boom is continuing and may even intensify, said Jiří Paták, director of financial advisors Chytrý Honza.

More and more prospective buyers are unable to find suitable properties, which will lead to the volume of mortgages being carried forward and seen in further quarters, Mr. Paták said.

A shortage of supply is seen as the main reason for the news that the average price of apartments sold in Prague grew by 8 percent year-on-year in the first quarter. The figure comes from a group of developers cited by the Czech News Agency.

The average price per metre in the period from the beginning of January to the end of March was a record CZK 60,517, the survey by Trigema, Skanska Reality and Central Group found.

This is the first time the figure has broken through the CZK 60,000 mark, said Trigema CEO Marcel Soural.

The developers said the number of flats offered on the capital’s property market had fallen 20 percent year on year. One-thousand 600 apartments changed hands in the capital in the first quarter, 250 fewer than in the same period in 2015.

One reason for the slowdown is the fact that construction of new apartment complexes has been hampered by delays in approval processes at local authorities.