Is 2024 the year to take out a mortgage in Czechia?

The prospect of renewed house price growth makes now a good time to consider buying a home.

William Nattrass

Written by William Nattrass Published on 14.05.2024 13:22:00 (updated on 14.05.2024) Reading time: 4 minutes

It’s well-known that Prague is a difficult place to be a house buyer. The disparity between wages and house prices is huge, and this holds true for Czechia’s other major cities, too. Czechia is the second most expensive country in Europe for purchasing a property on salary-adjusted terms, with Prague the continent’s third least affordable city.

Property experts, however, argue that now may be the right moment to take out a mortgage and secure more affordable home ownership. With cooled inflation leading to an expectation of continuous decreases in interest rates, house prices are likely to start growing again in the years to come. 2024 may, therefore, be the year to act for those interested in taking out a mortgage, to buy their dream home or get on the housing ladder for the first time.

Consider taking out a mortgage now

Mortgage interest rates are slowly falling, with rates on new loans averaging 5.19 percent, according to the Czech Banking Association. At the same time, after a period of stagnation in house prices following multiple economic shocks, property prices are already starting to rise again.

This combination of factors may make now a good time to buy, according to experts. Indeed, the likelihood that house prices will resume their previous sharp growth is leading experts to urge people to act quickly in order to secure a good deal.

“We are expecting a continuous decrease in mortgage interest rates during 2024, in line with expected decreases to the Czech National Bank’s base interest rates. At the end of the year, we are predicting mortgage interest rates of around 4 percent per annum,” says Tomáš Jedlička, Senior Consultant at Swiss Life Select.

Reduced mortgage interest rates could make a big difference to loan repayments, potentially reducing them by thousands of crowns per month, for those with bigger mortgages. But according to Jedlička, this will be outweighed by the increase in house prices expected as the accompaniment to lower interest rates.

“Decreasing interest rates will lead to increased house prices,” he explains. “That’s why we are recommending that people purchase now, when it is still possible to buy with a discount, instead of waiting for mortgage rates to fall. Cheaper rates will lead to more competition between buyers and significantly higher prices.”

Jedlička further points out that while mortgages can be refinanced down the line in accordance with changed circumstances, the chance to acquire a property for a discounted price may not return anytime soon.

Another factor in favour of taking out a mortgage sooner rather than later is an upcoming legislative change, to take effect in September, which will introduce a fee for early repayment of mortgages during refinancing, in which clients move from one bank to another. Those seeking a refinanced mortgage deal with better conditions will only have a limited window to do so before this new fee kicks in.

What do you need to take out a mortgage?

For most potential buyers, the single biggest obstacle to taking out a mortgage and buying a home is, very simply, the sky-high price of housing. This impacts on the size of the deposit needed to take out a mortgage; those over the age of 36 need to put down 20 percent of the property value as a deposit, while those younger than 36 need 10 percent.

Expat buyers do not need a permanent residence permit to take out a mortgage. Any form of residency permit or evidence of employment in Czechia is sufficient. Self-employed people can also take out a mortgage without complications, as long as they are tax-domiciled in Czechia; entrepreneurship income taxed in another country is not recognized by Czech mortgage providers.

Top tips for taking out a mortgage

Taking out a mortgage is not a complicated process, but with such a wide range of possible providers, it’s a good idea to turn to experts for advice.

“Always use a local broker who can help guide you through the whole process,” Jedlička says. “The broker can compare offers from various banks, negotiate interest rates and help you with the required documentation.”

“The broker will also communicate with the bank in your stead, solving any issues that arise. In many cases, brokers have agreements with banks enabling them to deliver all documents online, whereas if you deal with the bank directly as a client, you’ll usually have to visit the bank several times with your documentation, and you’ll get worse rates than with a broker.”

Whether you’re looking to buy your first home or switch mortgage providers in order to snag a more advantageous interest rate, economic trends and changing legislation indicate that now is a good time to make your move. Getting help from an English-speaking mortgage specialist may be the best way to unlock opportunities on the housing market that may not be around for long.

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