Others set to follow as two Czech banks raise mortgage rates

Two Czech high-street banks, Česká spořitelna and ČSOB, this week raised their mortgage rates. This comes in response to the central bank introducing the biggest interest rate hike in over two decades on Thursday.

ČSOB announced that it will increase interest rates on three-, five- and seven-year mortgages by 0.3 percentage points from next Monday. The new interest rate on the most frequently used mortgage, with a five-year fixed rate, will be 2.99 percent.

For its part Česká spořitelna will increase mortgage interest rates by an average of 0.4 percentage point from Thursday. The interest rate for five- and eight-year fixed rates will therefore start at 3.14 percent per year.

The Czech News Agency reported that other banks on the Czech market are also planning to charge more for mortgages.

Moneta Money Bank said it would do so from later this week. Meanwhile Raiffeisenbank is considering raising rates and Komerční banka and UniCredit Bank have not ruled out such a move.

Photo: Filip Jandourek,  Czech Radio

The Czech National Bank Board raised the key interest rate by 0.75 percentage point to 1.5 percent last week.

The main reason for the hike is fast rising inflation, which exceeded 4 percent in August.

Jan Sadil, a member of the ČSOB Board of Directors, told the Czech News agency that two years of record low mortgage rates were behind us. It is now necessary to adjust their level in line with market developments, he said.

However, Mr. Sadil said his bank did not expect the mortgage rate hike to deter people from taking out housing loans to any great extent.

Filip Belantz of Česká spořitelna said his bank expected interest rates to continue to rise. He said the main rate, according to which mortgage rates are set, could reach 2 percent this year, and up to 2.5 percent next year.

Mr. Belantz said that for that reason Česká spořitelna was recommending that clients choose long-term fixed rates; these provide the security of a stable repayment amount and unchanged rates, in principle for the entire period of mortgage loan repayment, he said.

The average mortgage rate rose to 2.32 percent in August from 2.23 percent in July, according to data from Fincentrum Hypoindex.

Experts say that Thursday's step by the CNB could lead to faster acceleration in the growth of mortgage interest rates.

Veronika Hegrová from Hyponamir.cz told the Czech News Agency that previous advice to obtain a mortgage as soon as possible was doubly true now.