CBA Hypomonitor November 2023: interest rate dropped to 5.67 %
CBA Hypomonitor: Mortgage market held at October level in November, interest rate fell to 5.67 %
Prague, 14 December 2023 - Banks and building societies granted mortgage loans worth CZK 16.2 billion in November. Month-on-month, the volume of mortgages granted was mostly stagnant, maintaining the stronger activity from October. From a year-on-year perspective, the volume of mortgages granted in November was more than double that of the previous month, which is mainly related to the low comparative base of the second half of last year, when the mortgage market froze. However, the data suggest that activity in the mortgage market is continuing to recover slightly. This is related to the easing of rules by the CNB, a slight decline in rates and deferred demand. However, despite the more favourable readings, this year's mortgage origination volume remains a third lower than it was at this time in pre-pandemic 2017 and 2018. Interest rates continued to fall in November, falling from 5.71 % to 5.67 %, the lowest level since the middle of last year. The information comes from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans.
Objem poskytnutých hypoték si v listopadu udržel silnější říjnovou úroveň
The volume of mortgages granted in November maintained the stronger October levelBanks and building societies granted mortgages to households in the volume of CZK 16.2 billion in November this year, according to the CBA Hypomonitor. Thus, the volume of mortgages granted was mostly stagnant month-on-month and maintained the relatively stronger activity of the previous month. The slight month-on-month growth of just under 1 % means that November was the strongest month so far this year in terms of mortgage lending. On a year-on-year basis, the effect of a lower comparative base is evident, with the data being compared to a very weak second half of last year. As a result, year-on-year mortgage volumes rose by 121 % in November. However, despite the visually very strong year-on-year increases, mortgage volumes remain 50 % lower than in November 2020 and this year's volumes are down by a third compared to the pre-pandemic years 2017-2018.
The volume of mortgages granted in November maintained the stronger October levelBanks and building societies granted mortgages to households in the volume of CZK 16.2 billion in November this year, according to the CBA Hypomonitor. Thus, the volume of mortgages granted was mostly stagnant month-on-month and maintained the relatively stronger activity of the previous month. The slight month-on-month growth of just under 1 % means that November was the strongest month so far this year in terms of mortgage lending. On a year-on-year basis, the effect of a lower comparative base is evident, with the data being compared to a very weak second half of last year. As a result, year-on-year mortgage volumes rose by 121 % in November. However, despite the visually very strong year-on-year increases, mortgage volumes remain 50 % lower than in November 2020 and this year's volumes are down by a third compared to the pre-pandemic years 2017-2018.
"The volume of newly granted mortgage loans is at this year's record levels for the second month in a row and at the same time more than double year-on-year. It is therefore clear that the worst period in the mortgage market for several years is now behind us. Two factors in particular contributed to this - the deactivation of the DSTI indicator at the beginning of July and the fact that some people no longer want to wait to see if and how much mortgage interest rates will fall next year," said Ondřej Šuchman, mortgage manager at Komerční banka.
The volume of actual new mortgages granted without refinancing reached CZK 13.4 billion in November after CZK 13.2 billion in October. This is a month-on-month increase of 1.3 %. The volume of refinanced loans (internally or from another institution) amounted to CZK 2.8 billion compared with CZK 2.9 billion a month earlier. The number of newly granted mortgages reached 4,166 in November, representing a 2 % month-on-month and 91 % year-on-year increase. This is the highest figure since June last year. Despite this improvement, this is still a low figure compared to 2020, when the average monthly number of new mortgages was around 6.7k, and then reached 9.5k in the exceptionally strong year of 2021.
"This year we are seeing increased interest in unsecured loans from building societies. A significant part of them is also used as support for the purchase or construction of real estate. Whether as a loan to improve older properties, or as an additional part to pay the purchase price. All this, of course, taking into account the current regulation on the maximum LTV," said Michal Noha, Director of Product Management, Raiffeisen stavební spořitelna.
Table 1: Summary of mortgage origination volumes and average interest rates for November 2023
The average mortgage rate fell slightly further in November
The interest rate on newly granted mortgage loans fell slightly further from 5.71 % in October to 5.67 %, remaining the lowest since July last year. Interest rates have thus been falling over the last six months, made possible by a gradual decline in market interest rates. Despite this development, however, mortgage rates remain above average over the last two decades and were at similar levels to those currently prevailing in 2008 and 2009. Realised interest rates, unlike bid prices, reflect the actual real interest rate on signed mortgage contracts. On average, offer rates are still above 6 %, where they have been since the middle of last year.
"Markets are preparing for central bank rate cuts next year. These expectations have intensified noticeably in recent weeks, which has been reflected in a faster decline in interest rates for longer maturities, which are also key for mortgage rates. This could portend a faster decline in mortgage rates than was anticipated not long ago. However, optimism must be tempered for now, as markets are currently very volatile and the situation could change again unexpectedly," says Jakub Seidler, chief economist at the Czech Banking Association.
Chart 1: Average mortgage rate - new business
Mortgage rates react with a slight delay mainly to the development of market interest rates for longer maturities. [1] They are influenced by a number of factors - not only the expected development of CNB base rates, but also the inflation outlook, economic developments and the dynamics of similar interest rates abroad. The aforementioned market interest rates for longer maturities have been very volatile this year and have already alternated between periods of growth and decline several times. This has been confirmed by developments over the past month, when market rates have fallen more sharply in the face of stronger rate cut expectations from major central banks. In the case of domestic rates for maturities between 3 and 10 years, the month-on-month decline was more than half a percentage point, bringing longer rates to their lowest level since March last year.
Average mortgage size fell slightly in November
The average mortgage size fell slightly in November from CZK 3.23m to CZK 3.21m. However, it is still the second highest value this year and, after October, the highest value since March last year. The highest average mortgage was reached in November 2021 at CZK 3.46m. Since then it has gradually decreased and reached its lowest level in January this year at CZK 2.83m. Table 2 shows the scenario of the evolution of the monthly instalment for different mortgage maturities. It shows that a rise in mortgage rates by one percentage point means an increase in the monthly instalment of approximately CZK 1,500 for an average mortgage size. Compared to the 2 % interest rate that was common on the market in earlier years, the current mortgage rate means an increase in the monthly payment for an average mortgage of approximately CZK 6,000. [2] The payment of a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 6,000.
Average mortgage size fell slightly in November
The average mortgage size fell slightly in November from CZK 3.23m to CZK 3.21m. However, it is still the second highest value this year and, after October, the highest value since March last year. The highest average mortgage was reached in November 2021 at CZK 3.46m. Since then it has gradually decreased and reached its lowest level in January this year at CZK 2.83m. Table 2 shows the scenario of the evolution of the monthly instalment for different mortgage maturities. It shows that a rise in mortgage rates by one percentage point means an increase in the monthly instalment of approximately CZK 1,500 for an average mortgage size. Compared to the 2 % interest rate that was common on the market in earlier years, the current mortgage rate means an increase in the monthly payment for an average mortgage of approximately CZK 6,000. [2] The payment of a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 6,000.
Table 2: Average monthly mortgage payment by length of repayment and interest rate
Mortgage market activity fell by 64 % for the whole year 2022
For the whole year 2022, banks and building societies granted mortgage loans in the volume of CZK 197 billion, of which net new loans without refinancing amounted to CZK 162 billion. This was a year-on-year decline of 63.6 % for all mortgages and 57 % for actual new lending. Although 2021 was an exceptional year in terms of mortgage market activity and the year-on-year decline in 2022 was expected, mortgage market activity was also almost 40 % lower last year compared to 2020. And this is to take into account the fact that the first half of last year was still relatively strong and only the second half of 2022 showed how noticeably the mortgage market has cooled.
[1] This is mainly for long term interest rate swaps (IRS), which reflect the price of money in longer maturities, such as 5 to 10 years.
[2] The table is available in the xls file attached on the CBA Hypomonitor website
For the whole year 2022, banks and building societies granted mortgage loans in the volume of CZK 197 billion, of which net new loans without refinancing amounted to CZK 162 billion. This was a year-on-year decline of 63.6 % for all mortgages and 57 % for actual new lending. Although 2021 was an exceptional year in terms of mortgage market activity and the year-on-year decline in 2022 was expected, mortgage market activity was also almost 40 % lower last year compared to 2020. And this is to take into account the fact that the first half of last year was still relatively strong and only the second half of 2022 showed how noticeably the mortgage market has cooled.
[1] This is mainly for long term interest rate swaps (IRS), which reflect the price of money in longer maturities, such as 5 to 10 years.
[2] The table is available in the xls file attached on the CBA Hypomonitor website
Chart 2: Annual volume and number of mortgages granted between 2020 and 2022
CBA publishes new aggregate statistics for the entire banking market
The Czech Banking Association publishes new aggregate statistics from the housing market in cooperation with its member banks. 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 mid-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 website www.cbamonitor.cz.
The Czech Banking Association publishes new aggregate statistics from the housing market in cooperation with its member banks. 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 mid-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 website www.cbamonitor.cz.
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:
2. Refinanced loans from another financial institution
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.
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 property
- Construction of property - including renovation of property
- Other new arrangements - only new loans that are not related to the purchase or construction of property, e.g. US mortgages, settlement of cohabitation, repayment of purchase price, settlement of inheritance share, settlement of cooperative share, etc.
2. Refinanced loans from another financial institution
Are loans that are the result of refinancing one or more loans from a financial institution other than the reporting financial institution. Irrespective of the amount refinanced and irrespective of the amount of any increase, the total amount of the newly originated loan is reported in this category.
3. Increased or internally refinanced loans
There are loans that were already part of the reporting entity's portfolio in the previous reporting period, and during the reporting period, any of the following changes occurred to them:
- increase in the agreed amount
- there were such changes that the original loan was refinanced/transferred to a new loan within the reporting entity. This is a truly new contract, not, for example, just a new arrangement within the refixation of an existing contract. Therefore, the volume of such loans in the CBA statistics is lower compared to "other new arrangements" in the statistics of the Czech National Bank.
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.
Disclaimer: Text translated automatically, excuse any imperfections.