CBA Hypomonitor: Spring mortgage boom with a slight drop in interest rates
March continued to see strong new mortgage volumes supported by another slight fall in the average rate to 4.68%
Prague, 15 April 2025 - In March 2025, banks and building societies granted new mortgages worth CZK 27.2 billion. Compared to February, activity increased by 29% in volume terms, which partly corresponds to seasonal effects but also to the continuing upward trend. The average realised mortgage rate also helped, falling further to 4.68% from 4.72% in February. Its year-on-year decline of 0.51% points reduces monthly repayments by around twelve hundred crowns, or approximately 1.4% of the mortgage applicant's net income. The average size of an actual newly granted mortgage rose slightly to CZK 4.07 million in March, raising the monthly repayment by around 3.9% of this income, i.e. by CZK 3.5 thousand year-on-year. If mortgages maintain the momentum of the last two months, the volume of new mortgages in 2025 could reach CZK 291bn, up by more than a quarter compared to last year. Although we assess this trend with caution due to the different results of seasonal adjustment. For the full year, this level would be roughly halfway between the 2020 (CZK 224bn) and 2021 (CZK 379bn) covenant years. This information comes from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans.
March continued the strong growth in new mortgage originations
In March, banks and building societies actually granted new mortgage loans worth CZK 27.2 billion, and in addition, clients refinanced their mortgages to the extent of CZK 5.7 billion. Compared to February, new mortgage activity is thus up by around 29% in volume terms, which is largely consistent with a seasonal effect (typically, the volume of new mortgages rises by 23% month-on-month in March; the previous month it was up by 13% compared to the usual 4%). But it also reflects a strong trend. On a seasonally adjusted basis, March's new mortgage numbers brought an increase (to around CZK 24.4bn compared with CZK 22.9bn in the previous three months), taking them to a level some 48% higher than in the first half of last year. In year-on-year terms, the growth in the volume of mortgage originations strengthened to 75% in March from 62% in February and after an 83% year-on-year increase in the previous year.
The number of new mortgages in March reached 6,680, up 47% from a year ago. On a seasonally adjusted basis, we estimate the number at around 5,926, about 3% above the average number (5,749) in the previous three months.
Table 1: Summary of mortgage origination volumes and average interest rates for March 2025
Excluding the legislation-related spike from last August, March recorded (on a seasonally adjusted basis) the highest number of new lending in three years.
|
|
Volume |
Number of |
Rate |
|
|
|||
|
Total |
32,8 |
8 382 |
4,68 |
|
New loans |
27,2 |
6 680 |
4,68 |
|
of which: |
|
|
|
|
for purchase |
21,3 |
5 187 |
4,67 |
|
for construction |
4,4 |
1 114 |
4,66 |
|
Other |
1,4 |
379 |
4,91 |
|
Refinanced from another institution |
4,4 |
1 365 |
4,65 |
|
Refinanced internally |
1,2 |
337 |
4,67 |
|
Source. |
|
|
|
"In particular, we see increased dynamics in the growth of sales, which was also contributed by the February special offer of some banks, when most of the contracts from this offer were signed in March.Current figures from the mortgage and real estate market also show that despite a relatively slight decline in interest rates, people's demand for their own housing is growing significantly," says Ondřej Šuchman, mortgage manager at Komerční banka.
The volume of refinanced loans (internally or from another institution) rose to CZK 5.7 billion in March. This is 45% above the average 3.9 billion refinanced last year and 165% above the 2.2 billion refinanced in 2023. The share of refinanced loans in total mortgage originations then rose slightly to 17.3%, close to last year's average of 16.9%. This is close to 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%. Whereas in March 2025, households refinanced at a rate of 4.66%, still a significant 0.4% point lower than the 5.1% rate in March 2024.
The average mortgage rate continues its downward trend
The average realised interest rate on new mortgages fell further to 4.68% from 4.72% in February. Its reduction thus confirms the downward trend below the 5% last seen in July 2024. Its March level is thus 0.51% points lower than the 5.19% rate a year ago, reducing monthly mortgage payments by around 1.4% of the applicant's net income, i.e. by 1.2k. 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
The March mortgage rate at 4.68% is about half a percentage point lower than a year ago.
Source: CNB, CBA Hypomonitor
"The economic recovery and falling interest rates are supporting demand for mortgage loans and the mortgage market is thus thriving. The big unknown for the future, however, is the uncertainty coming into the economy due to the completely unreadable US tariff policy, which has the potential to affect interest rates in both directions," says Petr Gapko, Chief Economist at MONETA Money Bank.
The Czech National Bank's hawkish stance and more inflationary data helped to raise longer-term market interest rates in March [1], slightly above the December level. In March, the Czech National Bank returned to pause in the rate-cutting process following its February cut to 3.75%. Its decision also reflected more inflationary economic numbers in the form of core inflation, especially in services, where wage growth remains brisk. This was reflected in a rise in three- and five-year interest rate swaps to 3.5% and 3.6% in March.
The uncertainty associated with President Trump's tariff wars is also impacting interest rates, which are experiencing high volatility in April, but have so far been reflected in a decline in interest rates. While President Trump's announced tariffs have led to a decline in equity markets, they have also been reflected in a decline in interest rates. For example, US five-year interest rate swaps have fallen to 3.6% after falling to 4% in early March from levels around 4.35% in the first two months. However, following the 90-day suspension of reciprocal tariffs, these five-year rates have returned to 3.9%. Similarly, in Europe, we have seen significant volatility in five-year swaps, but they have returned below 2.3%. European five-year rates are now around the autumn 2024 level, which is also true of US rates. Meanwhile, this is also reflected in Czech interest rate swaps, which so far in the first decade of April are around 20bp lower than in March with the five-year rate around 3.35%.
The mortgage rate on new mortgages fell to 4.68% in March, according to Hypomonitor. This was around 1.2% points above the average market swap rates, which is around 0.1% points above the long-term average since 2014. If the fall in market interest rates remains in place for an extended period of time, then it opens up room for mortgage rates to fall to below 4.3% during 2025. The extent of this reduction will depend on the impact of Trump's tariffs on the economy, i.e. whether they can overcome the current ongoing inflationary pressures.
[1] These are primarily long-dated interest rate swaps (IRS), which reflect the price of money at longer maturities, such as 2 to 10 years.
"The US tariffs are interpreted by the markets as a disinflationary factor across the US, Europe and therefore also in the case of the Czech economy. It remains to be seen how quickly and whether market expectations will translate into a decision by the Czech National Bank, which is likely to remain vigilant in the near term due to continued inflationary pressures from the services sector.If so, this could pave the way for mortgage rates to fall to 4.25% during the second half of this year," adds Jaromír Šindel, chief economist at the Czech Banking Association.
Average mortgage size rose further in January due to construction loans
The average size of an actual new mortgage rose slightly to CZK 4.07m in March. This is up by almost 2% month-on-month. Its size is thus 19% higher than the CZK 3.43mn 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 CZK 4 million, the increase in the value of the bank's assets is also significant. The average value has been rising steadily since April and is 18% above the previous record level of CZK 3.46 million set 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 (see CBA Monitor).
Impact on the average instalment
The combination of the fall in the interest rate and the higher average mortgage amount in March 2025 compared to the 2024 averages increased the average monthly mortgage payment by CZK 1.3k. 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 with a typical repayment term of around 26.5 years, reduce the monthly repayment by more than CZK 900 to around CZK 22,3 thousand. This represents a reduction of CZK 900,000, i.e. 1% of the applicant's net income compared to the average repayment 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 2,700, which is, however, again for the current value of the average new mortgage.
However, the current average mortgage amount is 11% higher than the average mortgage amount in 2024, which contributes to an increase in the monthly payment of CZK 2.1k. The average monthly mortgage payment is CZK 2,014,000 higher than the average monthly mortgage payment last 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.
Conversely, compared to the average 2.8% mortgage interest rate for new mortgages in 2019, the current refinancing mortgage rate of 4.66% when the loan maturity is shortened raises the monthly repayments on an average mortgage by approximately CZK 1,800, or about 3.8% of the current gross average wage.
Chart 2: Average amount of new mortgages actually granted by purpose
The slight increase in the average mortgage amount in March was driven by the return of a higher average mortgage for construction, while the average mortgage loan for purchase was relatively stable.
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: |
|
|
4 065 955 |
||||
|
Average interest rate in %: |
|
2,0 |
3,0 |
4,0 |
4,68 |
5,0 |
6,0 |
|
|
|
|
|
Monthly instalment: |
|||
|
Mortgage maturity in years: |
15 |
26 160 |
28 080 |
30 080 |
31 490 |
32 150 |
34 310 |
|
20 |
20 570 |
22 550 |
24 640 |
26 130 |
26 830 |
29 130 |
|
|
25 |
17 230 |
19 280 |
21 460 |
23 030 |
23 770 |
26 200 |
|
|
|
26,5 |
16 470 |
18 540 |
20 750 |
22 330 |
23 090 |
25 560 |
|
|
30 |
15 030 |
17 140 |
19 410 |
21 050 |
21 830 |
24 380 |
|
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
In the year-on-year comparison, the decrease in the mortgage rate resulted in a saving of CZK 1,220 in the average monthly payment, but the increase in the average mortgage amount caused an increase of CZK 3,490.
Source: CBA
Statistical annex
Source: CBA Hypomonitor
Note: These are actually new mortgages (i.e. refinancing and increases). The underlying data is available in the xls file attached on the CBA Hypomonitor website
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 an almost 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, number and average amount of mortgages granted between 2020 and 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.