Current year-on-year inflation in August exceeded four percent, a rate that the Czech Statistical Office last recorded thirteen years ago. The Czech National Bank decided to take action against further growth last week when it announced a doubling of key interest rates to half a second percent.
This was the most significant increase in the last twenty-four years. Individual commercial banks are already responding to the rise in key interest rates, raising their rates and making loans to consumers more expensive.
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Interest growth
From Thursday, interest rates at Česká spořitelna will rise by an average of four tenths of a percentage point. ČSOB will raise rates on Monday, by an average of three tenths of a percentage point, and Airbank also admits an unspecified increase. Other institutes Fio Banka, Komerční banka, Raiffeisenbank and UniCredit Bank are currently analyzing the situation. Of the addressed rates, Sberbank does not plan to increase only.
According to a number of experts, the CNB’s move was not the last and another may come in the coming months, which is also expected by bankers who discussed mortgages in the 1990s.
“We are facing an increase in rates, this is inevitable given that the inflation outlook is unhappy and we expect higher price growth. Two percent (as the basic interest rate) is completely realistic, “said Lubomír Lízal, a former member of the CNB Bank Board, and Michael Pupala, CEO of Modrá pyramida, said:” The CNB rate can be expected to reach two percent by the end of the year and the forecast is that next year should be around 2.5 percent, which is a long-term normal. “
Mortgage rate
The increase in rates will necessarily be reflected in the average interest rate on mortgages. It has been growing gradually since the beginning of the calendar year and in August (which is the last available values) it was 2.32 percent, according to Fincentrum Hypoindex. It reached its highest value in the last five years in January 2019 at three percent.
“We go back a year and a half to the time before the covid, when interest rates on mortgages were at the level of three percent. Money is becoming more expensive, but if we are talking about housing loans, it will still be one of the cheapest money on the market, ”comments Jan Sadil, a member of the ČSOB Board of Directors, on the prospects of the mortgage market. According to him, extremely low interest rates and mortgages were not sustainable in the long run.
“Three percent rates do not mean dramatically expensive mortgages, we had a time when the rate was around four or five percent. A three percent mortgage is still a good investment. When investing for your own home, the time is almost always the right time. I would not hesitate, “adds Pupala.
Banker Lízal then points out that according to rising mortgage rates, “we have a better future” – interest rates are falling at a time when the economy is failing, unemployment is rising, which is not expected at the moment. “Population savings are growing and I see no reason why the economic crisis should come.”
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