William Malcolm

Czech Mortgage Lending Jumps To Record High in June

The volume of new mortgage loans for housing from banks and building societies reached 39.5 billion crowns in June. This is 8.6 billion more than in May and 20 billion crowns more than in June 2020. This June is the strongest month in statistics, which has been monitored since 2014. This follows from current statistics from the Czech National Bank and the Czech Banking Association.

“The growth rate of new mortgages, which was already considered unreal year-on-year in May, was surpassed by several horse-lengths in June. factors, “said Miroslav Zámečník, the main advisor of the association.

Most of all, according to him, the overheated market would be helped by a substantial increase in the supply of finished apartments on the market. The number of building permits issued and construction started is growing, but it is not impressive in the long run. It doesn’t look like a quick turnaround, he added.

According to CNB statistics, the APR index, ie the average annual percentage rate of charge, rose by 0.05 percentage point to 2.26 percent for mortgage loans in June. Thus, in June, the “creeping” growth of APR rates continued at roughly the same rate as in the previous month. The interest rate also rose, by 0.06 point to 2.12 percent.

The assumptions that the APR and interest rates on mortgage loans will go up at a modest pace are gradually being fulfilled. According to Zámečník, the CNB will continue to raise its rate after raising its key interest rate in June in its efforts to reduce inflation expectations. “The sources of mortgage financing are gradually becoming more expensive for banks, so we are rather at the beginning of a gradually growing curve,” he said.

The refinancing of mortgage loans from banks and building societies, ie the transition to another bank, fell by about a quarter of a billion crowns to 9.8 billion crowns in June compared to the previous month, but activity is still very strong. It was the third strongest month since January 2014 after March and May of this year.

According to him, the interest in refinancing mortgages has a clear and rational explanation, so people try to lock it in lower installments as long as market conditions allow. “They are taking advantage of the competition between banks. There are still plenty of rivals trying to attract clients with a better offer,” he said.