Czech National Bank removes major obstacle in acquiring a mortgage

The move follows in the footsteps of a devastating year for the Czech real estate market due to plummeting sales.

Thomas Smith

Written by Thomas Smith Published on 06.06.2023 15:17:00 (updated on 06.06.2023) Reading time: 3 minutes

A change to mortgage applications in Czechia means that they should now become accessible to tens of thousands more people nationwide. The Czech National Bank (ČNB) has removed the maximum limit of the debt-service to income (DSTI) indicator that banks use to evaluate mortgages. This measure will take effect in July this year.


The DSTI expresses the ratio between the total amount of a consumer’s monthly repayments of all loans and his/her net monthly income.

Now easier to be approved

In simple terms, this means that people who are currently repaying different types of institutional debts will have a greater chance to obtain a mortgage, as they will theoretically be allowed to borrow more. The previous maximum DSTI threshold had been 45 percent (50 percent for those under the age of 36).


ČNB Governor Aleš Michl said last week that, given higher interest rates and double-digit inflation, the DSTI indicator is “not needed.” Michl noted that due to the currently high mortgage rates – presently at over 6 percent – the ČNB wants to allow more people to get mortgages.

The two other key determinants of mortgages – the loan-to-value (LTV) and debt-to-income (DTI) ratios – remain the same. The maximum LTV ratio, which is the ratio of a loan to the value of the purchased property, will stay at 80 percent. The limit of the DTI ratio, which is an applicant's total debt value expressed in multiples of their net annual income, will stay at 8.5 (or 9.5 for under-36-year-olds).

High mortgage rates, dire real estate sales

Data from 2022 shows that last year was bleak for mortgages. The total number of mortgages provided plummeted by around 60 percent year on year, and in November 2022 the Czech Banking Association reported that mortgage rates had reached their highest levels in about 20 years.

High mortgages and high inflation, paired with a sharp drop in real disposable income, meant that total real estate sales also fell by a huge 50 percent in 2022, as reported by Surging rental and purchase prices – increasing by about 20 percent in the capital – only contributed to Czechia’s ailing real estate and mortgage market last year.

Although real estate prices and average inflation have moderately declined so far this year, in March 2023 apartment sales dropped 19 percent year on year, according to data from property aggregator

Trying to boost mortgage activity

The ČNB wants to improve the situation further. It has signaled that it will reduce mortgage rates in the second half of this year, when average inflation – currently at slightly under 13 percent – is forecast to return to single digits. Mortgage rates about two years ago were 2 percentage points lower than today, and inflation was at near 3 percent.

The mortgage market in Czechia is showing some signs of recovery – in March of this year, the mortgages issued amounted to a total of CZK 12.6 billion, a 60 percent month-on-month increase and the highest number since June 2022. However, the total amount of mortgages is roughly half of what it had been in March 2020.

Karina Kubelková, a board member of the ČNB, noted at a press conference last week that the first quarter of 2023 showed a significant decrease in the volume of new mortgage loans issued. 

The ČNB also noted that average real estate prices remain “overvalued” in Czechia and that at the end of the first quarter of 2023 that annual costs were 57 percent higher than the median household income level.

With a recent report showing that as many as one in five Czech adults are planning to purchase a new home in the next few years, the ČNB’s move will be welcomed by thousands of potential future homeowners. Whether the decision will precipitate a flurry of activity in the real estate market remains to be seen.

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