Saturday, 15 March 2025
The average mortgage rate in the Czech Republic continued its downward trend at the beginning of March, declining by 0.07 percentage points to 5.05% compared to the previous month. This marks the lowest level since the spring of 2022, according to data from the Swiss Life Hypoindex, which tracks mortgage loan offer rates at the start of each month. The index reflects the average mortgage rate for loans covering 80% of a property’s value and provides insight into market trends.
An analyst at Swiss Life Select confirmed that this aligns with predictions of a gradual decline in mortgage interest rates. The decrease in the average supply rate of mortgage loans is primarily driven by reductions in interest rates offered by individual banks. However, significant differences remain among financial institutions, with notable variations based on the length of the interest rate fixation period.
Currently, the lowest rates are available for mortgages with a three-year fixation, making them one of the most common choices among borrowers. Some banks are offering special deals where clients can secure mortgage loans at rates just below four percent.
According to the Swiss Life Hypoindex, the average rate for a three-year fixation has remained below five percent for four consecutive months, while the five-year fixation dropped below this threshold for the first time in March. However, the month-to-month changes remain minimal, with fluctuations in the range of only a few hundredths of a percentage point.
Despite the downward trend, concerns about tariff wars and inflation expectations are keeping the market and the Czech National Bank cautious about further reductions in interest rates. “This uncertainty negatively impacts the potential for deeper mortgage rate cuts. Mortgage prices are closely linked to interest rate expectations over several years. If inflation uncertainty persists, a dramatic drop in mortgage rates is unlikely,” explained Tom Kadeřábek, head of the product department at Swiss Life Select.
He also noted that the financial market conditions do not currently support a significant reduction in mortgage rates, as the underlying rates remain stagnant. However, if banks slightly reduce their profit margins, which are currently above average, mortgage rates could see a more noticeable decline.
For homeowners, the impact of falling rates is already evident in their monthly mortgage payments. As of March 5, a CZK 3.5 million mortgage loan covering 80% of a property’s value, with a 25-year maturity and an average 5.05% interest rate, results in a monthly payment of CZK 20,555. This represents a monthly savings of CZK 2,800 compared to two years ago, when a similar mortgage had a 6.37% interest rate and a monthly payment of CZK 23,340 in February 2023.
While the mortgage market is gradually adjusting to lower rates, future developments will largely depend on economic stability, inflation trends, and the monetary policy decisions of the Czech National Bank.
Source: CTK
