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The total debt of the Czechs increased by a record 407 billion to 3.07 trillion crowns year-on-year. The data of the Banking and Non-Banking Register of Client Information show that the main reasons are the continuing interest in mortgages and the increased demand for consumer loans. But people have stopped saving and more often borrow money for smaller expenses. However, this is what can lead to big problems. It will become more expensive again.
The indebtedness of the population of the Czech Republic exceeded three trillion crowns for the first time in history. It increased by a record 407 billion crowns, ie by more than 15 percent, they state experts. The volume of debt from housing loans climbed by almost a fifth compared to the previous year – specifically by 383 billion crowns. People gave the most for mortgages and building savings loans in Prague and the South Moravian Region. The reason is, among other things, the ever-increasing real estate prices in large cities.
Interest in consumer credit also increased significantly during the first quarter. The volume of debt from these loans increased by CZK 24 billion year-on-year, ie by five percent. This is the largest year-on-year increase since the end of 2019, ie since the last quarter before the coronavirus pandemic.
People have stopped saving and are borrowing more
“People have started to go back to their previous consumption habits, they stopped saving and started borrowing more for smaller expenses,“warns Jiří Rajl, director of the Non-Banking Register of Client Information. He also adds that some people use consumer loans as a supplement to mortgages:” We see this especially in Prague, where debt for consumption is growing twice as fast as in the rest of the country. But combining a mortgage with consumer loans also increases the risk of future repayment problems,“protects.
This is exactly what economists fear. Although the number of people unable to repay loans is slowly declining, the situation may change rapidly in the future. “The debt growth trend will continue, albeit at a slower pace. Due to inflation, interest rates on both mortgages and consumer loans are rising. People also have to spend for other things, such as energy and food, so they will not be able to afford it, “explains economist Lukáš Kovanda.
After the end of the fixation, prices will increase by thousands of crowns, warns the economist
In the coming months and years, he said, at current debt levels there is a risk of growth of so-called problem loans, such as non-performing mortgages. Interest rates will rise, and many people will end up fixing housing loans.
“The increases can be as much as five to six thousand crowns a month in installments for ordinary real estate. If this adds up to the further rise in prices in the economy, an increase in the unemployment rate will probably be added next year, so this may be such a significant increase in installments for many households that they start to have trouble repaying the mortgage at all. And some households will no longer be able to repay, “he warns.
It is not ruled out that “debt will become a social problem”. According to Kovanda, this situation will not happen immediately, but it could already be in the next (or next year) year.
Therefore, people should pay particular attention to one fundamental mistake that they often make. And that they also borrow for less important things. “Every debt that is for anything other than real estate or children’s education is pointless and dangerous“Kovanda warns, adding that in addition to sudden expenses, car repayments may be an exception in certain cases. If people do not have clothes or food, then instead of indebtedness, it is more appropriate to apply for social benefits.
TN.cz
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