Czech mortgage volume rises to CZK 37.8 billion in July as interest rates edge lower

Banks and building societies in the Czech Republic issued mortgages worth CZK 37.8 billion in July, representing a 2 percent increase compared with June, according to data from the Czech Banking Association’s Hypomonitor. New loans without refinancing rose by 3 percent to CZK 30 billion. Average interest rates on new mortgages edged down from 4.56 percent in June to 4.53 percent in July, continuing a gradual downward trend.

“In the first month of the holidays, we observe that despite the holiday period, mortgage activity among Czechs is slightly increasing, both in volume and in the average size of loans provided. A strong signal for the continuation of this trend towards securing one’s own housing is also a slight decrease in interest rates,” said Zdeňka Kovářová, mortgage manager at UniCredit Bank.

So far this year, mortgage volumes have reached CZK 222 billion, up 56 percent compared with the same period in 2024. The number of new mortgages in July increased slightly by 0.9 percent from June to 6,996, a level 34 percent higher year-on-year and close to pre-pandemic volumes. According to Czech Banking Association analyst Jaromír Šindel, the figure is around 17 percent above the average of the previous three months once seasonal effects are adjusted.

Refinanced and increased loans also grew, reaching CZK 7.8 billion in July, nearly double the monthly average of CZK 3.9 billion seen last year. Despite this rise, their share of total mortgage volume eased to 20.6 percent.

The drop in the average mortgage rate reinforced the downward shift below 5 percent that began in mid-2024. Rates were 0.54 percentage points lower than in July last year, reducing the average monthly payment by roughly CZK 1,400, or about 1.5 percent of applicants’ net income. However, the rising size of new mortgages offset this relief. The average mortgage granted in July was CZK 4.28 million, up more than 1 percent from June and 14 percent higher year-on-year. As a result, monthly payments increased by nearly CZK 2,800 compared with last year, representing around 2.9 percent of household income.

Šindel noted that further declines in rates could be limited as market interest rates in the Czech Republic continued to rise in July. “The decline in interest rates has stopped, assuming both the current forecast of the Czech National Bank and the interbanking market,” added Vratislav Jůza, regional director at 4fin. He emphasized that stable rates may not suppress demand, as rising real wages and continued housing shortages are keeping pressure on prices and stimulating mortgage uptake.

Some banks have even diverged from the overall easing trend. According to Finvox loan specialist Jan Šafanda, two banks slightly raised their mortgage rates by 0.1 to 0.2 percentage points in July, citing increased interbank costs. He noted that with lenders enjoying one of their strongest years since the pandemic, the incentive to lower rates further has weakened. This suggests that while mortgage demand is recovering, the pace of interest rate reductions may slow considerably in the months ahead.

Source: CTK