The number of mortgages in Czechia rose by 60 percent in March

The mortgage market is showing signs of improvement but is still roughly half of what it was in March 2020. Banks and building societies provided mortgages totaling CZK 12.6 billion in March, an increase of 60 percent compared to February.

The interest rate for truly new mortgages without refinancing fell for the third month in a row, from 5.9 percent in February to 5.86 percent, according to the Czech Banking Association’s Hypomonitor. All banks and building societies providing mortgages on the Czech market supply data to it.

The volume and number of mortgages granted in March reached the highest level since the middle of last year when the market began to noticeably cool down. Although the March activity on the mortgage market is regularly more favorable compared to February, according to Hypomonitor, this year's increase was above normal.

From a year-on-year perspective, the effect of the lower comparative base from last year is starting to show gradually, although the first half of 2022 was still very strong. The year-on-year decline in granted mortgages eased to 59 percent in March from 69 percent in February.

The volume of actually newly granted mortgages without refinancing reached CZK 10.3 billion in March, after February's CZK 6.5 billion, which is the highest level since June 2022. The volume of refinanced loans, both internally and from other institutions, amounted to CZK 2.3 billion, or CZK 1 billion more than in February.

"The mortgage market experienced a noticeable recovery in March. A number of households probably concluded that the environment of high rates will be with us for a longer time and it is not worth waiting for a significant reduction in mortgage rates," Czech Banking Association’s chief economist Jakub Seidler said.

"A certain impetus could also be provided by gradually falling real estate prices, which, according to data from the real estate registry, continued to decline slightly in March and are already over 20 percent lower in some regions compared to the peak in the middle of last year," he added.

The interest rate on newly granted mortgage loans in March is the lowest since October last year, but it is still among the highest levels in the last 20 years, although it was at similarly high values in 2008 and 2009.

The average mortgage in March increased for the second month in a row and reached the level of CZK 2.95 million, which is the highest level since July last year when it was above CZK 3 million. With stricter rules from the Czech National Bank and high-interest rates increasing monthly payments, some households had to reduce their intended mortgage amount. The highest average mortgage was in November 2021, when it reached CZK 3.46 million.