Mortgages to become more difficult to get as stricter rules take effect in Czechia

Starting this Friday, buying a home in the Czech Republic will become even more difficult than it was until now, with stricter rules set by the Czech National Bank for housing loans coming into force. According to analysts, up to 10 percent of people applying for a mortgage will not get one as a result of the tighter conditions.

Under the new rules set by the Czech central bank, people must have at least a fifth of the property’s price saved upfront, while until now, 10 percent of the property’s total value was sufficient. Some other limits under which commercial banks are allowed to grant mortgages are also stricter.

The central bank decided to tighten the conditions for granting housing loans at the end of November last year. Until now it has done so in the form of a recommendation, but as of April 1 the conditions are stipulated by a law.

To qualify for a mortgage, a person’s total debt must now not exceed 8.5 times their net annual income, although banks can be slightly more benevolent with people under the age of 36.

Another condition for obtaining a mortgage is that the monthly debt repayments must not exceed 45 per cent of the applicant’s monthly net income.

According to experts, the current tightening of the rules marks the end of a mortgage boom in the Czech Republic. Last year, banks granted 178,000 mortgages, half as many as in 2020, according to data from the Czech Banking Association’s Hypomonitor. The total volume of mortgages, including refinancing, reached a record CZK 541 billion in 2021 and CZK 312 billion in 2020.

The average mortgage rate in the Czech Republic has been skyrocketing in recent months and currently stands at 4.6 percent. Analysts says it could reach around 5.5 percent in the second half of 2022.