The decision to change the rules was taken at the end of last November, in connection with the macroeconomic outlook as part of the regular financial stability assessment. The Czech National Bank's Board believes that the growth in property prices in the Czech Republic, which has reached double-digit pace in most large cities, is unsustainable in the long run.
Should the economy slip into recession, it is precisely mortgage loans for so-called investment flats that carry an increased risk of default. The aim of this preventive measure is therefore, to a certain extent, to cool investment demand for property and to prevent negative systemic changes in the economy.
Importantly, the Czech National Bank currently regards as an “investment property” the third and any further flat or house you own, or any real estate acquired for the purpose of letting.
What does the Loan to Value ratio mean?
Part of the new binding recommendation is a change to the LTV indicator, i.e. Loan to Value. It describes the ratio between the loan amount and the value of the property. While in the past banks commonly provided 80 % for investments (young buyers purchasing their own home could even reach an LTV of 90 %), from 1 April the LTV will be capped at 70 % unless the property is intended for the applicant's own housing.
One of the aims of the new regulation is also to avoid having to tighten mortgage rules for young families, who already struggle to find affordable housing
So when buying an investment flat with a purchase price of 10 million Kč, you must have at least 3 million Kč ready from your own funds. It remains to be seen, however, how strictly banks will in practice assess whether the funds in the applicant's account really are their own.
The DTI limit is also being activated
An even bigger blow to some people's investment plans may be the activation of the DTI limit, i.e. Debt to Income. This determines how high an investor's total debts may be in relation to their annual income.
From April, investing in property on a large scale will be virtually impossible for anyone without a significantly above-average income
Total indebtedness (including existing loans, leasing, credit cards, etc.) from 1 April 2026 must not exceed seven times the applicant's net annual income. Anyone coming to a bank to apply for a loan of 4.2 million Kč should therefore earn at least 600 thousand Kč net per year.
For people on average incomes who are already repaying a mortgage on their own house, the DTI 7 limit will make it almost impossible to obtain another loan for an investment flat.
Stricter cash flow assessment
Another novelty is the binding recommendation of increased prudence towards expected rental income. Banks should now take a more sober approach to their calculations and count only around 70 % of the reported expected income.
An empty flat with no tenant must not stand in the way of regular repayments on the loan provided
In some cases, they may also ask the applicant to prove that they will be able to repay the investment mortgage even during a loss of rental income lasting up to 3 months, taking into account their other obligations towards financial institutions.
In the final weeks of March, we can therefore expect something of a “run” on the banks and on developers' catalogues as well. If you want to make it under the old rules, you must have your application signed by the end of March. Beware – some mortgage banks also require approval by then.
Are you planning to buy an investment property to let and not sure who to turn to? We will be happy to guide you through the entire process of selecting and acquiring a property and adding it to your investment portfolio, and to take your new flat into professional management. Simply call +420 277 000 330 or e-mail sales@flatservice.cz to find out more about our real estate and property management services.
