CBA Hypomonitor: New mortgage volume is the highest since March 2022
The average mortgage rate fell to 5.07% in May.
Prague, 13 June 2024 - Banks and building societies granted mortgage loans worth almost CZK 24 billion in May this year, of which actual new loans exceeded CZK 20 billion for the first time in more than two years, while refinanced loans slightly exceeded CZK 3.5 billion. Month-on-month, the volume of mortgages granted rose by 8% compared with a strong April, although May is traditionally slightly more favourable than April. In year-on-year terms, the volume of mortgages granted in May was 92% higher. The figures from the mortgage market this year thus confirm its recovery, with the volume of mortgages granted in the last two months already above 2020 levels. The average mortgage rate for new loans continued to fall, reaching 5.07% after 5.10% in April. The decline in interest rates has thus slowed compared to previous months, which is attributable to the relatively volatile market interest rates. The average mortgage size increased further to EUR 3.63 million. CZK. The above information is based on data from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans;
Volume of mortgages granted in May slightly accelerated
Banks and building societies granted mortgages to households in the volume of CZK 23.7 billion in May, according to the CBA Hypomonitor. The volume of mortgages granted thus rose by 8% month-on-month.After taking into account the traditional seasonality, it would have been mostly stagnant month-on-month, but April's figures were above expectations. May volumes thus remain favourable and the recovery in mortgage activity continues this year. Mortgage origination volume in May reached its highest level since March 2022. Year-over-year mortgage growth in May was 92%, a figure only slightly above the year-over-year average. This year's May mortgage origination volume was thus already 15% higher than in May 2020, although the number of mortgages originated was 15% lower.
"Demand for mortgage loans continued to grow in May, mainly due to the postponed demand of some clients who were waiting for interest rates to fall. Values around 5% are already acceptable for them and at the same time property prices are already rising again, so this period may be suitable for acquiring one's own property," says Ondřej Šuchman, Mortgage Manager at Komerční banka.
Table 1: Summary of mortgage origination volumes and average interest rates for May 2024
|
|
Volume |
Number |
Rate |
|
|
|||
|
Total |
23,7 |
6 790 |
5,07 |
|
New loans |
20,1 |
5 543 |
5,07 |
|
of which: |
|
|
|
|
at buy |
16,0 |
4 277 |
5,06 |
|
at construction |
3,2 |
932 |
5,05 |
|
other |
0,8 |
334 |
5,33 |
|
Refinanced from another institution |
2,9 |
997 |
5,05 |
|
Refinanced internally |
0,7 |
250 |
5,08 |
|
Source: ČBA Hypomonitor |
|
|
|
The volume of actual new mortgages granted without refinancing reached CZK 20.1 billion in May and exceeded CZK 20 billion for the first time since March 2022. Month-on-month, the volume increased by 7.1%, i.e. CZK 1.3 billion. The volume of refinanced loans (internally or from another institution) amounted to CZK 3.6 billion after CZK 3.2 billion in April. The share of refinanced loans in the total volume of mortgages granted was 15.1% in May, which is below the annual average of 15.7%, although it increased slightly compared with April. The number of new mortgage originations reached 5,543, also the highest since March 2022, when just under 7,500 mortgages were originated;
"The May and April figures confirm a solid recovery of the mortgage market, after almost two years we are above the 2020 levels in terms of the volume of mortgages granted and if the development is maintained, the volume of mortgages granted this year could be roughly at the level of 2020, which was the second strongest year in this respect after the record year 2021," says Jakub Seidler, chief economist of the Czech Banking Association.
The average mortgage rate fell slightly further and is the lowest since June 2022
The interest rate on actual new mortgage loans fell further from 5.10% in April to 5.07%, the rate of the month-on-month decline was thus lower than in previous months. This development is attributable to volatile market interest rates, which started to rise again in mid-March and are currently at the highest levels of the year. Realised interest rates, as opposed to bid prices, reflect the actual real interest rate on signed mortgage contracts.
"The suspension of the decline in interest rates is due to the situation on the financial market, where we have seen the price of money rise in recent months for 2- or 3-year fixations. However, we still expect a slight decline in mortgage rates towards the end of this year," adds Dalibor Mička, credit product manager at UniCredit Bank.
Chart 1: Average mortgage rate - new business
Mortgage rates are reacting with a lag of several months mainly to the development of market interest rates for longer maturities. 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 [1] started to fall last October due to growing market expectations of rate cuts by major central banks, but these expectations turned around again in March this year, when market rates started to rise again after several months. This development has partially closed the space for mortgage rates to fall more rapidly, although markets are currently volatile and have alternated between periods of falling and rising mortgage rates in recent months. They are roughly 0.2 percentage points higher compared to last month, and their average value in May was the highest this year.
[1] These are primarily long-term interest rate swaps (IRS), which reflect the cost of money at longer maturities, such as 2 to 10 years.
Average mortgage size reaches new record level
The average mortgage size continued to grow in May, from CZK 3.6 to CZK 3.63 million. CZK. Together with April's value, it thus surpassed the previous record level of CZK 3.46 million set in November 2021. The gradual decline in mortgage rates or the relaxation of macro-prudential income limits by the CNB, together with the gradual growth in real household incomes, is making it possible to achieve a higher mortgage. The mortgage amount is also related to the evolution of property prices, which were 6% higher at the end of last year than in the last quarter of 2021.
The scenarios of the evolution of monthly repayments for different mortgage maturities are shown in Table 2. It shows that a one percentage point increase in mortgage rates means an increase in monthly repayments of around CZK 1,500 to CZK 2,000 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] A mortgage payment of CZK 1 million with a 30-year maturity at current interest rates is around CZK 5.5 thousand.
[2] The table is available in the xls file attached on the CBA Hypomonitor website
Table 2: Average monthly mortgage payment by length of repayment and interest rate
|
Average size of new mortage in CZK: |
|
|
3 625 136 |
||||
|
Average interest rate in %: |
|
2,0 |
3,0 |
4,0 |
5,07 |
6,0 |
7,0 |
|
|
|
|
|
Monthly instalment: |
|||
|
Mortgage maturity in years: |
15 |
23 328 |
25 035 |
26 815 |
28 800 |
30 591 |
32 584 |
|
20 |
18 339 |
20 105 |
21 968 |
24 065 |
25 972 |
28 106 |
|
|
25 |
15 365 |
17 191 |
19 135 |
21 341 |
23 357 |
25 622 |
|
|
|
30 |
13 399 |
15 284 |
17 307 |
19 617 |
21 735 |
24 118 |
|
Source: ČBA |
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Note: the coloured column corresponds to the interest rate of the last CBA Hypomonitor, other rates are illustrative |
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Mortgage market activity fell by a quarter in the whole year 2023
In the whole year 2023, banks and building societies granted mortgage loans in the volume of CZK 150 billion, of which net new loans without refinancing amounted to CZK 124 billion. This was a year-on-year decline of 24%. This is mainly due to the fact that the first half of 2022 was still strong in terms of mortgage originations and the higher comparative base from this period is thus affecting the year-on-year comparison. As a result, there were 50% fewer mortgages originated year-on-year in the first half of 2023 and over 50% more in the second half of 2023. Compared to the pre-pandemic years 2017-2019, the volume of mortgages granted in 2023 was roughly one-third lower;
Chart 2: Annual volume and number of mortgages granted between 2021 and 2023
CBA publishes 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 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:
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.