CBA Hypomonitor: February mortgages continued brisk thanks to lower rate
February still suggests continued strong volumes of new mortgages, thanks to a further decline in the average rate to 4.72%.
Prague, 14 March 2025 - In February 2025, banks and building societies granted new mortgages worth CZK 21.1 billion. Compared to January, the volume of activity increased by 13%, which partly reflects the seasonal effect of the recovery after a weaker New Year start. The average realised mortgage rate fell further to 4.72% from 4.78% in January. The year-on-year decline of 0.64% points reduces monthly repayments by around 1.7% of a mortgage applicant's net income, i.e. by around CZK 1.5k. CZK. On the other hand, the average size of the actual newly granted mortgage rose slightly to CZK 4 million in February, raising the monthly instalment by approximately 3.9% of this income, i.e. by CZK 3.4 thousand year-on-year. CZK. If mortgages maintain the momentum of the last three months, then the volume of new mortgages in 2025 could reach CZK 278bn, around a fifth higher than a year ago. This information is based on data from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans.
February maintained a strong volume of newly granted mortgages
In February, banks and building societies actually granted new mortgage loans worth CZK 21.1 billion, and in addition, clients refinanced their mortgages to the extent of CZK 4.3 billion. Compared to January, new mortgage activity was thus up by around 13% in volume terms, which partly reflects a seasonal effect (typically, the volume of new mortgages rises by 4% month-on-month in February; the previous month it fell by 5% compared to the usual -11%).On a seasonally adjusted basis, February's new mortgage figures brought an increase (to around CZK 24.3 billion compared with CZK 22.6 billion in the previous three months), taking them to a level around 48% higher than in the first half of last year. In year-on-year terms, growth in the volume of mortgage originations slowed to 62% in February from 72% in January and after an 83% year-on-year increase in the previous year. The number of new mortgages in February reached 5,277, up 37% from a year ago. We estimate the seasonally adjusted number to be around 5,931, about 3% above the average number (5,756) in the previous three months.
"The volume of new mortgages continued at a brisk pace in February, and it was not just the usual mild February recovery that contributed to its recovery. This increase reflects not only a further increase in the average mortgage amount, but we are also seeing a slight increase in the number of new mortgages," says Jaromír Šindel, chief economist at the Czech Banking Association.
Table 1: Summary of mortgage origination volumes and average interest rates for February 2025
|
|
Volume |
Number |
Rate |
|
|
|||
|
Total |
25,5 |
6 579 |
4,72 |
|
New loans |
21,1 |
5 277 |
4,72 |
|
of which: |
|
|
|
|
for purchase |
17,4 |
4 235 |
4,71 |
|
for construction |
2,8 |
753 |
4,69 |
|
Other |
0,9 |
289 |
5,03 |
|
Refinanced from another institution |
3,5 |
1 050 |
4,68 |
|
Refinanced internally |
0,8 |
252 |
4,73 |
|
Source. |
|
|
|
The volume of refinanced loans (internally or from another institution) rose to CZK 4.3 billion in February. This is 10% above the average of 3.9 billion refinanced last year and 100% above the 2.2 billion refinanced in 2023. The share of refinanced loans in total mortgage originations then fell slightly to 16.9%, matching last year's average of 16.9%. This is slightly below the 17.2% share from 2022-2023, but still below the nearly 29% share from 2020-2021, when households refinanced at a mortgage rate of 2.14%. Meanwhile, in February 2025, households refinanced at a rate of 4.69%, still a significant 0.6% point lower than the 5.3% rate in February 2024.
The average mortgage rate continues its downward trend
The average realised interest rate on new mortgages fell further to 4.72% from 4.78% in January. Its reduction thus confirms a downward trend below the 5% last seen in July 2024. Its February level is thus 0.64% points lower than the 5.36% rate a year ago, reducing monthly mortgage payments by around 1.7% of the applicant's net income, or 1.5k. CZK. By comparison, the average mortgage rate in 2024 was 5.07% compared to 5.81% in 2023.
Chart 1: Average mortgage rate - new business
Source: CNB, CBA Hypomonitor
"The average mortgage rate fell to 4.72% in February from 4.78% a month earlier, and its month-on-month decline was the third strongest since April last year.Mortgage rates are likely to continue falling due to competition, although the current developments in market interest rates in the Czech economy and the eurozone may hinder this process," adds Jaromír Šindel, chief economist at the Czech Banking Association.
Although the Czech National Bank renewed the decline in interest rates in February by lowering them to 3.75%, market rates with longer maturities have been in the same range on average since autumn last year. A number of factors are reflected in them, not only the development of the CNB interest rate, but also a combination of the outlook for inflation, the economy and exchange rate dynamics. In addition, expectations of higher arms spending, which is perceived to be inflationary, seeped into higher market interest rates during March. Czech core inflation also showed no slowdown in its monthly dynamics in February. Added to this is the continued brisk pace of wage growth in Q4 2024.
For example, the market is currently signalling less than two quarter-percentage point cuts in the CNB interest rate during 2025 (i.e. to around 3.3%). However, this signalled cut is 0.4 percentage points more modest than forecast last September. This is due to stronger-than-expected consumer inflation growth in the middle of last year or stronger wage growth in the economy. And this in an economy that is still expected to recover this year with the labour market still tight rather than loose.
If we assume a scenario of a moderate economic recovery, then structural reforms are needed to bring long-term market rates down to ease inflationary pressures in the economy from the supply side. These would bring the discussion on the hypothetical level of the central bank's neutral interest rate back to 3% from the currently discussed level of 3.5%.
At the same time, the development of similar interest rates abroad also plays into this dynamic. The aforementioned market interest rates for longer maturities have been volatile of late, reacting to a large extent to market expectations linked to US rate developments. The Czech five-year rate is now around 3.6-3.7%, some 0.55 percentage point higher than in September, i.e. around the levels at the beginning of January this year. This reflects a return of euro rates to the 2.5% level of January this year, also in the context of possible higher arms spending. On the other hand, US five-year interest rates fell slightly to 4.1% from over 4.3% on concerns about the strength of economic growth.
The average mortgage size rose further in January due to construction loans
The average size of an actual new mortgage rose slightly in February to $4 million. The number of new mortgages was up to CZK 4.5 billion in January, i.e. by around 2% month-on-month. The size is thus 18% higher than the CZK 3.38mn mortgage originated in the same period last year. CZK a year ago. This reflects a combination of higher house prices, wage growth and lower interest rates. Leaving aside the extraordinary value of almost EUR 4 million, the increase in the value of the bank's assets is also significant. CZK in August 2024 (the impact of new legislation), the average value has been rising steadily since April and is 15% above the previous record level of CZK 3.46 million in November 2021. CZK. The gradual decline in mortgage rates or the continued easing of macroprudential income limits by the CNB, together with the gradual increase in real household incomes, is making it possible to achieve a higher mortgage. Mortgage rates are also linked to the development of property prices, which rose by more than 10% year-on-year last year.
Impact on the average repayment
The combination of the fall in interest rates and the higher average mortgage amount in February 2025 compared to the 2024 averages increased the average monthly mortgage payment by 1.1k. Kc. The scenarios of the evolution of the monthly payment for different mortgage maturities are shown in Table 2. It suggests that a fall in mortgage rates of almost 0.4% points relative to their average rate of 5.07% in 2024 would, for an average mortgage size of approximately 26.5 years, reduce the monthly instalment by more than CZK 800 to approximately CZK 22,1 thousand. This is a reduction of 0.9% of the applicant's net income compared to the average payment in the previous year. Compared to the average mortgage rate of 5.81% in 2023, the savings due to the interest rate amounted to more than CZK 2,600, which is, however, again for the current value of the average new mortgage.
However, the current average mortgage amount is 9% higher than the average mortgage amount in 2024, which contributes to an increase in the monthly payment of CZK 1.8k. The average monthly mortgage repayment in the previous year, based on last year's average mortgage amount but at the current interest rate. The mortgage payment of CZK 1 million with a 30-year maturity at current interest rates is around CZK 5.2 thousand.
Chart 2: Average amount of new mortgages actually granted by purpose
Source: CNB, CBA Hypomonitor
Table 2: Illustration of the average monthly mortgage payment by length of repayment and interest rate
|
Average size of a new mortgage in CZK: |
|
|
4 004 246 |
||||
|
Average interest rate in %: |
|
2,0 |
3,0 |
4,0 |
4,72 |
5,0 |
6,0 |
|
|
|
|
|
Monthly instalment: |
|||
|
Mortgage maturity in years: |
15 |
25 770 |
27 650 |
29 620 |
31 090 |
31 670 |
33 790 |
|
20 |
20 260 |
22 210 |
24 260 |
25 820 |
26 430 |
28 690 |
|
|
25 |
16 970 |
18 990 |
21 140 |
22 770 |
23 410 |
25 800 |
|
|
|
26,5 |
16 220 |
18 260 |
20 430 |
22 090 |
22 740 |
25 170 |
|
|
30 |
14 800 |
16 880 |
19 120 |
20 820 |
21 500 |
24 010 |
|
Source: CBA [1] |
|||||||
|
Note: the coloured column corresponds to the interest rate of the latest CBA Hypomonitor, other rates are illustrative; the coloured row corresponds to the average maturity of new mortgages according to CNB data; amounts are rounded to tens of crowns. |
|||||||
Chart 3: Illustrative comparison of the average monthly mortgage payment with a year ago, depending on the interest rate, mortgage size and maturity in years
Source: CBA. Note: Amounts are rounded to tens of crowns.
Mortgage market in 2024: record growth of 83%
For the whole year 2024, banks and building societies granted new mortgage loans in the volume of CZK 228 billion. In addition, mortgages were refinanced to the tune of CZK 47 billion, bringing the total mortgage market to CZK 275 billion in 2024 from CZK 150 billion in 2023. If we adjust the volumes for the 4-8% increase in house prices (according to various statistics during Q1-Q3 2024), the volume of new mortgages grew slightly less in real terms. This corresponds to a more modest 53% year-on-year increase in the number of new mortgages in 2024 to almost 62,000 and a nearly 20% increase in the average amount of a new mortgage granted to CZK 3.7 million. Compared to the pre-pandemic years 2017-2019, the volume of new mortgages granted in 2024 was roughly less than a fifth higher.
Chart 2: Annual volume and number of mortgages granted from 2021 to 2024
Source: CBA Hypomonitor
CBA publishes summary statistics for the entire banking market
The Czech Banking Association, in cooperation with its member banks, publishes new aggregate statistics on the housing market. These are mainly the volumes and numbers of newly granted and refinanced mortgages and the respective interest rate. These statistics are published by the CBA in aggregate form for the entire banking sector on a regular basis around the middle of each month. All domestic banks and building societies providing mortgages in the Czech Republic participate in the survey. The data are available from January 2020 in the attached file on the website www.cbaonline.cz, where the relevant statistics can also be found separately for banks and building societies. The above figures are for the sector as a whole, which can also be viewed in a simple graphical form on the cbamonitor.cz website.
Methodology of the CBA Hypomonitor
The CBA Hypomonitor divides mortgage loans granted by banks and building societies to households into several categories in order to distinguish new loans from refinanced or internal refixations. New loans are then reported in categories according to the purpose of the loan:
1. new loans
These are loans whose full volume enters the economy for the first time. This category does not include loan consolidations or loan refinancing. It is divided into three categories:
- Purchase of real estate
- Property construction - including property renovation
- Other new arrangements - only new loans that are in no way related to the purchase or construction of the property, e.g. so-called American mortgages, settlement of a JVM, repayment of the purchase price, settlement of an inheritance share, settlement of a cooperative share, etc.
2. Refinanced loans from another financial institution
These are loans that have been originated by refinancing one or more loans from a financial institution other than the reporting one. Irrespective of the amount refinanced and regardless of the amount of any increase, the total amount of the newly originated loan is reported in this category.
3. Loans increased or internally refinanced
These are loans that were already part of the reporting entity's portfolio in the previous reporting period and have undergone one of the following changes during the reporting period:
- an increase in the agreed amount
- changes such that the original loan has been refinanced/converted into a new loan within the reporting entity. This is a genuinely new contract and not, for example, just a new arrangement in the context of a refixation of an existing contract. Therefore, the volume of such loans in the CBA statistics is lower than 'other new arrangements' in the Czech National Bank statistics.
The following banks and building societies provide data for the CBA Hypomonitor: Air Bank, Banka Creditas, Česká spořitelna, ČSOB, ČSOB Stavební spořitelna, Fio banka, Hypoteční banka, Komerční banka, mBank, Modrá pyramida, MONETA Money Bank, MONETA Stavební spořitelna, Oberbank, Raiffeisen stavební spořitelna, Raiffeisenbank, Stavební spořitelna České spořitelna, UniCredit Bank.