The era of cheap mortgages is coming to an end. Within a few weeks, maybe months, interest rates will move upwards. Initially, this shift will be minimal, but over time, interest rates can climb to the level of two percent. For the average person, this will mean an increase in the monthly payment by tens of euros.
When people took out a mortgage in recent years, they usually fell below one percent. They did not even consider long fixation, as the banks offered very favorable conditions on a permanent basis.
The card gradually starts to turn.
“Although the ECB has not yet announced an increase (expected later this year or early 2023), mortgage rates will certainly change soon,” said VUB Bank macroanalyst Zdenko Štefanides.
He also added that the increase in mortgage rates may take several weeks.
The chief economist of Slovenská sporiteľňa also assumes that the ECB will come up with an increase in interest rates this year. Another wave of price increases should come early next year.
“The price of money on the market is gradually rising and sooner or later commercial banks will have to take this situation into account in their rates for clients,” explained Mária Valachyová.
Interest rates can rise to over two percent
The question is how much this will affect the Slovak market.
“The pressure to increase mortgage rates will therefore be there, on the other hand, there is relatively strong competition in the Slovak banking market, which is why mortgage prices are among the lowest in the EU. Thus, rates may increase, the scope for margin growth will be limited for the competition, “estimated Tibor Lörincz, an economic analyst at Tatra banka.
The analyst then also pointed to the ceiling where interest rates could climb.
“At the moment, we cannot imagine that mortgage rates will rise above 2.5% within two years,” Lörincz added.
Such changes would also have a significant impact on Slovaks’ wallets. We will show it on a model example. If today you have a mortgage of 100,000 euros with a repayment period of 25 years and an interest rate of 1 percent, then the repayment amount is 376 euros.
If the interest rate rises to 1.5 percent, the monthly payment will increase by 23 euros. If at 2 percent, it is already an increase of 47 euros.
Fixation is important at the rate
However, at the time of fixation, the bank cannot change your interest rate.
“The change in the amount of the installment will occur only after the end of the current fixation. Thus, even if rates change by 0.5 percent or 1 percent today, the repayment will not be affected. If the fixation is completed in a few years, it will be important what the rates will be at that time. These can also be the same as the current ones or many times higher, “said analyst Pavel Škriniar
Interest rates have been rising in the neighboring Czech Republic for several months now, which jumped to 4 percent. However, all the analysts contacted are convinced that we will certainly not see such a sharp increase in our country. Rather, creeping increases are to be expected.
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