The data of the CBA Hypomonitor, which contains data from all domestic banks and building societies providing mortgage loans on the domestic market, showed that the year 2021 was quite exceptional in terms of the mortgages provided.
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As many as half more mortgages were provided than a year earlier, bringing the final number to about 178,000.
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Record volumes
The total volume of provided mortgages, both new and refinanced, reached a record volume of 541 billion crowns in 2021, and in 2020 the banks arranged housing loans in the amount of 312 billion crowns.
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The market also recorded similarly strong year-on-year growth in the case of actually newly negotiated mortgages (excluding refinancing and refixing), which banks also provided last year in a historically record volume of CZK 379 billion, which represents a 70% year-on-year increase compared to 2020.
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“In the last months of last year, we did not notice less interest in mortgages; on the contrary, fears of rising prices accelerated the decisions of many of our clients. The average interest rate on mortgages grew mainly in the second half of last year and climbed to the level of three percent, “said Jiří Feix from Hypoteční banka.
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“However, this figure does not reflect the actual offer prices of mortgages, which reached the level of four percent at the end of the year and are likely to rise further in the first half of 2022. In 2022, we expect the market to slow down and the volume of newly provided mortgages to return to the values of 2020, ”he added.
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Radek Perman from Air Bank also expects the mortgage market to decline.
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“The peak of interest in mortgages is over. Due to rising interest rates, we recorded a more significant decline in applications in December. We expect an even faster cooling of demand this year, when the market could fall by 40 percent, “he said.
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Volumes fell in December
According to the December CBA Hypomonitor, banks and building societies provided mortgages to households in December last year in the total amount of CZK 44.3 billion, two billion less than in November.
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The volume of newly negotiated mortgages amounted to 34.2 billion crowns, 1.6 billion crowns than in November. The volume of refinanced mortgage loans was over 10 billion crowns.
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Not only the volume but also the number of agreed mortgages was lower in December than in November. A total of 14,180 clients came to the bank for mortgages (there were 14,552 in November).
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In the last month of the year, the bank arranged 9943 new loans (10,352 in November) and 3,381 refinanced (3247 in November).
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Mortgages will continue to rise in price
The growth of rates is accelerating, which reflects the development of interest rates in the market and their rapid growth in recent months. The average interest rate on new mortgage loans reached three percent in December.
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Compared to November’s 2.7 percent, it increased by 30 basis points. It was thus at the highest level since the first half of 2014.
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As bank experts point out, the December average interest rate still captures concluded contracts that have been negotiated with clients in previous months, so it is lower than mortgage rates.
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In December, they were already around four percent on average, and this year we can expect further growth due to the development of market interest rates.
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“The market interest rates on which mortgage rates derive rose at the end of last year and are now at their highest level since 2008. At that time, the average mortgage rate on new mortgages was around 5.5 percent,” said Jakub Seidler. chief economist of the CBA.
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“If market rates do not change significantly this year, mortgage rates should gradually move towards this limit this year, although the specific rate will depend on the chosen length of fixation,” the economist said.
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“At the moment, the market interest rate is lower for longer maturities, yet many clients may prefer a shorter fixation in the hope that interest rates will fall again in the future,” added Seidler.
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The average installment will increase
The average mortgage amount in December reached the amount of 3,440,708 crowns.
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With the expected rise in interest rates, the monthly payment for new or refixed loans also increases. The table shows the monthly payment scenarios for different mortgage maturities.
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It is clear from this that if the average mortgage rate reaches the limit of five percent this year, in the case of the average mortgage, the monthly payment will increase by 3.5 to four thousand crowns per month compared to the current one.
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Compared to the interest rate of two percent, which was common on the market in 2016 and 2017, mortgage rates of five percent would mean an increase in the monthly payment for an average mortgage by five to six thousand crowns per month.
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| Monthly payment of the average mortgage depending on the maturity and interest rate |
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| The average amount of a new mortgage | CZK 3,440,708 |
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| Average interest rate in%: | 2,0 | 3,0 | 4,0 | 5,0 | 6,0 | |
| Mortgage maturity in years | Monthly payment (in CZK) | |||||
| 15 | 22 141 | 23 756 | 25 451 | 27 209 | 29 035 | |
| 20 | 17 406 | 19 077 | 20 850 | 22 707 | 24 650 | |
| 25 | 14 584 | 16 311 | 18 161 | 20 114 | 22 169 | |
| 30 | 12 718 | 14 501 | 16 426 | 18 470 | 20 629 | |
| Source: CBA | ||||||
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