Mortgages under scrutiny: can we expect lower rates?
Expensive mortgages, expensive flats and an untenable property market situation. This was the story of the whole previous year, resulting in a decline in interest in home ownership. According to experts, 80 % less money is currently circulating in the mortgage market than a year ago, and the outlook remains unclear. However, there is talk of interest rate cuts.
The Czech National Bank holds the line
Although some banks have already begun cutting interest rates, we are unlikely to see any dream reduction this year. The base interest rate is set by the Czech National Bank, which last decided in February this year not to reduce or increase the rate for the time being. The two-week repo rate therefore remains at 7 %, the discount rate at 6 % and the Lombard rate at 8 %. Domestic banks can therefore only revive the market to a limited extent.
“A significant reduction in interest rates cannot happen at present, and what we are seeing is more a matter of competition between individual banks. A more substantial reduction can realistically happen only once inflation falls, which is expected during the course of next year. Of course, it will also continue to depend on other factors that have contributed to the rise in inflation,” says David Novotný of the real estate company Bohemian Estates.
A partial revival of the mortgage market
Even small changes can attract prospective buyers. The average applicant can now obtain an annual rate of 6.27 %, which is only one tenth of a percentage point lower than in the previous month, but it is still the most significant decline in the last two years.
Air Bank and UniCredit Bank have already reduced their interest rates, and Česká spořitelna has also taken an interesting step. When selling a property, it allows clients to transfer the mortgage to the buyer at the original interest rate, which is often fixed several years in advance and in most cases offers far more favourable terms than those currently available on the market. Such steps may help revive the mortgage market and increase interest in purchasing a property of one’s own.
Patience when buying
According to Novotný, the combination of cheaper mortgages and a competitively priced property can make it possible to buy a flat or house on reasonable terms. However, patience is important when buying. “The key now is to find a good offer and know what financing options are available to you. We are increasingly meeting clients who want a complete service from us and primarily need to plan a strategy so that they know how much money they can obtain, on what terms and when it is worth proceeding with a purchase.”
Second-hand flats can now be purchased much more cheaply. However, you need to factor in further investment after the purchase. Renovation costs can also escalate. “If someone is buying an older flat in the hope of saving money, I strongly recommend inviting an expert to inspect the condition of the flat or house. They can also estimate the cost of any subsequent building work. That said, I certainly do not discourage anyone from buying an older flat. Sometimes, this step can save you a great deal of money. Timing is particularly important,” concludes Novotný of Bohemian Estates.