Mortgage Rates in the Czech Republic Rise to 5.51 Per Cent in September

Mortgage rates in the Czech Republic rose again in September. For borrowers, this means additional monthly costs of almost CZK 1,300 compared with March for a model mortgage of CZK 3.5 million.

Mortgage rates in the Czech Republic continue to rise at the beginning of autumn. According to the Swiss Life Hypoindex, the average advertised rate increased to 5.51 per cent in September. Compared with August, this represents an increase of 0.09 percentage points.

Back in the spring, the trend still pointed towards a further decline in financing costs. In March, the average advertised interest rate had fallen to 4.89 per cent, its lowest level for some time. Since then, however, mortgages have become more expensive by a total of 0.62 percentage points.

The rise in interest rates, initially regarded as a short-term correction, has therefore developed into a sustained trend over the summer months. However, it remains unclear whether rates have already reached their preliminary peak or will continue to rise in the coming months.

For borrowers, the difference between 4.89 and 5.51 per cent is clearly noticeable. For large loan amounts, even a few tenths of a percentage point can result in additional monthly costs ranging from several hundred to several thousand crowns, depending on the term and amount of the loan.

For a model mortgage of 3.5 million crowns with a term of 25 years, the monthly repayment at an interest rate of 5.51 per cent currently amounts to around 21,520 crowns. This is almost 1,300 crowns more than in March this year.

Banks Have Little Scope for Interest Rate Cuts

Autumn is traditionally a period when banks step up their sales activities. Following the summer months, they intensify their efforts to attract new customers and focus on meeting their annual targets. This usually leads to special offers and stronger competition. This year, however, the scope for broad interest rate cuts is likely to be limited.

Numerous banks had raised their mortgage rates during the summer. In August alone, some institutions increased rates for selected fixed-rate periods by between 0.2 and 0.4 percentage points, while others left their terms unchanged. This indicates that there is currently little scope for general interest rate cuts.

Selective Offers Rather Than Across-the-Board Cuts

Any autumn promotions are therefore likely to be limited to individual customer groups or specific products. Banks could, for example, favour selected fixed-rate periods, refinancing arrangements or particularly creditworthy customers. Individually negotiated discounts and additional benefits could also become increasingly important.

The further development will depend crucially on whether banks’ long-term refinancing costs stabilise after several months of increases. If this happens, competition could initially slow any further rise in interest rates and subsequently lead to the first targeted reductions.