CBA Hypomonitor: Volume of new mortgages rose to CZK 228 billion last year
Average mortgage rate fell to 4.8 percent
Prague, 15 January 2025 - For the whole year 2024, banks and building societies granted new mortgage loans worth CZK 228 billion, which represents a year-on-year increase of 83%. Together with refinanced loans worth CZK 47 billion, the total volume of the mortgage market reached CZK 275 billion, which is a significant growth compared to CZK 150 billion in 2023. Even after taking into account the growth in property prices, the real growth of the market was still very strong. This corresponds to an increase of 53% in the number of new mortgages in 2024 to 62,000, accompanied by a 20% increase in the average mortgage amount to CZK 3.7 million in 2024 and almost CZK 3.86 million at its end. In December 2024, banks granted new mortgages worth CZK 19.7 billion. Compared to November, activity fell by 8%, but this can be attributed to the seasonal effect of Christmas. The average mortgage rate fell slightly further to 4.80% from 4.85% in November. The year-on-year fall in the rate reduces repayments by around 2.2% of a mortgage applicant's net income. If the market maintains December's momentum, the volume of new mortgages could reach CZK 250 billion in 2025, representing a 10% year-on-year increase. This information is based on data from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans.
The volume of mortgages granted fell in December, but at the expense of Christmas
In December alone, banks and building societies actually granted new mortgage loans worth CZK 19.7 billion, and in addition, clients refinanced their mortgages to the extent of CZK 4.1 billion. Compared to November, mortgage activity thus fell by around 8%, which can, however, be partly attributed to the seasonal effect of Christmas. On the other hand, after adjusting for differences in the number of working days, December's figures showed a slight increase and thus remained about a quarter higher than in the first half of this year. In year-on-year terms, the growth in mortgage originations in December eased further to 56% from 61% in November and after a 94% increase in the first three quarters of this year.
"In terms of interest in new mortgages, December was divided into two separate periods, with interest weakening greatly in the second half of December due to Christmas, despite the reduction in rates. However, interest has visibly shifted to the beginning of January," says Marek Richter, Head of Mortgage Services at Air Bank.
After a one-off increase in August, the volume of refinanced loans (internally or from another institution) fell to CZK 4.1 billion in December to the level of the middle of this year. As a result, the share of refinanced loans in total mortgage originations fell slightly to 17%, slightly above this year's average of 16.9%. This remains 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%. While in December 2024, households refinanced at a rate of 4.72%, but still well below the 5.6% rate from December 2023
"December's mortgage market numbers were still very good. Furthermore, the positive correlation with rising house prices is confirmed, which is reflected in an increasingly higher average mortgage amount.The good news for clients is that interest rates are continuing to fall, but given the December increase in the price of interest rate swaps, it is likely that mortgage rates will not go down as quickly as expected during last year," notes Ondřej Šuchman, mortgage manager at Komerční banka.
Table 1: Summary of mortgage origination volumes and average interest rates for December 2024
|
|
Volume |
Number |
Rate |
|
|
|||
|
Total |
23,8 |
6366 |
4,79 |
|
New loans |
19,7 |
5110 |
4,80 |
|
of which: |
|
|
|
|
for purchase |
16,6 |
4205 |
4,79 |
|
for construction |
2,2 |
599 |
4,77 |
|
Other |
0,9 |
306 |
5,15 |
|
Refinanced from another institution |
3,2 |
1024 |
4,69 |
|
Refinanced internally |
0,8 |
232 |
4,83 |
|
Source. |
|
|
|
The average mortgage rate continues its downward trend
The average mortgage rate for new loans fell slightly further to 4.80% from 4.85% in November.Its fall thus confirms a downward trend below the 5% last seen on average in July 2024. Its December level is thus 0.84 percentage points lower than the 5.65% a year ago, reducing repayments by around 2.2% of a mortgage applicant's net income. Its average value for 2024 was 5.07% compared to its average value of 5.8% in 2023.
Chart 1: Average mortgage rate - new business
Source: CNB, CBA Hypomonitor
Mortgage rates are reacting with a lag of several months mainly to the development of market interest rates for longer maturities. They are affected by a number of factors, not only the CNB interest rate, but also a combination of the outlook for inflation, the economy and exchange rate dynamics. For example, the market is currently signalling a decline in the CNB interest rate by around 0.6 percentage point during 2025, following a more moderate rise in the Czech consumer price index in December. However, this is still more than half a percentage point lower than forecast in September. This is due to stronger-than-expected consumer inflation growth in the middle of last year or stronger wage growth in the economy.
At the same time, developments in similar interest rates abroad are also playing into this dynamic. The aforementioned market interest rates for longer maturities [1] have recently been volatile and are reacting to a large extent to market expectations linked to the development of US rates. The Czech five-year rate is now around 3.7%, about 0.5 percentage point higher than in September and 0.2 percentage point higher than a month ago. This reflects a return of these US rates to over 4.5%, which is more than one percentage point above the September level. This was accompanied by a return of similar euro rates to 2.5%, about a quarter percentage point higher than in September.
[1] These are mainly long-term interest rate swaps (IRS), which reflect the price of money at longer maturities, such as 2 to 10 years.
"The development of mortgage interest rates was favourable for new mortgages as it reduced monthly mortgage payments by approximately CZK 2 300. Leaving aside the increase in house prices, the lower interest rates have essentially offset the impact of the 2024 consumer price increase on their real incomes for these applicants.However, those who refinanced loans granted earlier face higher loan repayments, which further steals from their real income," notes Jaromír Šindel, chief economist at the Czech Banking Association.
Average mortgage size increased slightly further in December
The average size of a new mortgage rose slightly further in December to CZK 3.86m. CZK from CZK 3.37 million. CZK a year ago. This may reflect a combination of higher house prices, wage growth and lower interest rates. Leaving aside the extraordinary value of almost CZK 4 million, it is worth CZK 3 million. CZK in August, the average value has been rising steadily since April, surpassing the previous record level of CZK 3.46 million set in November 2021. The gradual decline in mortgage rates or the continued easing of macroprudential income limits by the CNB, together with the gradual rise in real household incomes, is making it possible to achieve a higher mortgage. The mortgage rate is also linked to the development of property prices, which were roughly 10% higher year-on-year in Q3 this year.
The fall in mortgage interest rates this year has reduced the repayment on the average new mortgage by 10%, almost 2.6% of the applicant's net income. Table 2 shows scenarios for the evolution of the monthly repayment for different mortgage maturities. It shows that a fall in mortgage rates of almost one percentage point relative to their average level in 2023 would, for an average mortgage size of almost 27 years, reduce the monthly repayment by more than CZK 2 300. [2] Conversely, compared to the average 2.8% mortgage rate for new mortgages in 2019, the current refinance mortgage rate of 4.7% raises monthly payments for the average mortgage by more than C$5,600 when the loan term is shortened. The repayment of a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 5,300.
[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 mortgage in CZK: |
|
|
3 863 736 |
||||
|
Average interest rate in %: |
|
2,0 |
3,0 |
4,0 |
4,80 |
5,0 |
6,0 |
|
|
|
|
|
Monthly instalment: |
|||
|
Mortgage maturity in years: |
15 |
24 863 |
26 682 |
28 580 |
30 161 |
30 554 |
32 604 |
|
20 |
19 546 |
21 428 |
23 413 |
25 082 |
25 499 |
27 681 |
|
|
25 |
16 377 |
18 322 |
20 394 |
22 147 |
22 587 |
24 894 |
|
|
|
30 |
14 281 |
16 290 |
18 446 |
20 280 |
20 741 |
23 165 |
|
Source. |
|||||||
|
Note: The colored column corresponds to the interest rate of the latest CBA Hypomonitor, other rates are illustrative |
|||||||
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
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.