While the mood on the mortgage market was still rather optimistic last year, the June Hypoindex climbed to 5.30%, i.e. 0.11 of a percentage point higher than in the previous month. And this is not merely a cosmetic adjustment, but rather the sign of a new trend. The indicator reflects the current average offered mortgage rate for an LTV of up to 80%.
Why are mortgages getting more expensive again?
According to experts, current mortgage rates mainly reflect global events, led by the crisis in the Strait of Hormuz. Depending on the mood of the US administration on any given day, the strait is open, closed, a war is raging there in full force and, at the same time, the USA has long since won it gloriously – and this ambiguous, ever-changing information and these narratives add to the unrest on world markets.
Every day of a war that isn’t even a war on paper means more expensive housing in the Czech Republic
It may sound paradoxical, but the fact is that events thousands of kilometres away, seemingly unrelated to the Czech housing market, can have an enormous impact on whether people in Prague, for example, will be able to afford a home of their own. Banks are currently very cautious and they are likely to remain cautious in the coming months as well. A return of the average mortgage rate below 5% is therefore out of the question in both the short and medium term.
How much will mortgage repayments rise?
For a model mortgage of CZK 4 million over 25 years, the current increase in the interest rate means the monthly repayment will go up by roughly one thousand crowns. At first glance that may not look so catastrophic, but it is worth bearing in mind that even the mortgage rates seen so far are extreme when viewed through the lens of the past twenty years. Any further rise is therefore above all a psychological signal and an indication that the dream of relatively cheaper property is over.
Saving up is no longer enough to buy your own home – you also need good judgement and the luck to pick the right moment to actually buy
On top of that, hundreds of thousands of existing mortgage clients face a painful refixation this year, which will significantly increase their cost of living. Given the instability of global events, however, it is hard to predict whether it pays off to fix the interest rate for a shorter or a longer period. “It is no longer simple answers that matter, but the ability to time your move correctly and choose a fixation that will hold up even in an uncertain economic environment,” Hypoindex experts say of the current situation.
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