Everything you wanted to know about the mortgage market – after COVID 2020 summary

Recent events due to the Coronavirus brought a lot of changes to the Czech mortgage market. Cheaper mortgages, eased restrictions, repayment postponements, banks merging – we never experienced so many changes in such a short period! We always keep an eye on the market and we summarise the most important information for you. 

First half of the year just passed, let’s have a quick look to the first 6 months: 

  1. January – While in the whole 2019 mortgage rates were going down, the trend reversed in January and rates started to slowly rise again. We also hosted a free seminar: Buying Investment Properties As An Expat for almost 50 people.
  2. February – The Czech National Bank (ČNB) increased the 2W Repo rate to 2,25%, average mortgage rate in this month was 2,42%. Also we posted our most successful blogpost so far – Costs associated with buying property in the Czech Republic.
  3. March – A lot of things happened in this month. ČNB lowered the 2W Repo rate to 1,75% and then to 1%; regular banks started to allow repayment postponements and lot of protection mechanisms were announced by the government for those affected by the COVID. Banks also started to limit providing mortgages in certain fields (gastro, travel industry, culture events…)
  4. April – Banks started to offer lower mortgage rates since they got more flexibility in their margins due to lower inter-banking rates brought by ČNB. The central bank also eased rules for providing mortgages, on the other hand banks are fighting their internal rules. Some banks stopped providing 90% financing, one bank stopped providing mortgages temporarily and other bank merged with a bigger one.
  5. May – ČNB lowered the 2W Repo rate again, this time to 0,25% (last seen 2017); more banks start to offer rates close to 2% again and ease their requirements. As it turned out, repayments postponement is not as straightforward as it was presented since it limits one’s lending possibilities in the future. Number of mortgages provided by the banks in May 2020 is the lowest in 10 years.  
  6. June – Banks start to compete agains each other bringing mortgage rates below 2%. Some of the anti-COVID restrictions are being lifted by the banks and things start to get back to normal again.

So how is the situation looking now?

Mortgage approval process almost the same as before:

Despite the fact that COVID slowed the whole market down, banks still lend money as they used to without any major restrictions. Only exception and stricter approval process is for people who work in the fields like restaurant business and travel industry and also for those who asked for repayments postponement. As of today (3.7.2020) there are 4 banks on the mortgage market which can finance at 90% LTV, these banks are Česká spořitelna, Komerční banka, Hypoteční banka and Equa bank. Other banks due to a bit of uncertainty stick to 80% LTV financing only but besides of that we didn’t experience any other change.

What are the lowest interest rates?

The 3 biggest banks still offer rates slightly above 2% for 80% financing; 90% financing starts around 2,5%. Lowest rates in general are these days 1,64% by mBank conditioned by mortgage life insurance (for 5 years fixation and 80% financing) or 1,89% without it, which is to our understanding the best official rate. mBank is also very expats friendly so feel free to get in touch with us and we will advise on the whole process for free. 

What about property prices?

Unfortunately it is too early to have any statistics whether the property prices were effected and how much. Our best estimation is that the only properties which now might experience slight lowering in prices are the ones which are in the touristic areas (mainly in Prague 1) due to the obvious fact that tourism is down to minimum and investment flats generate much less revenues. 

How to take advantage of the current situation?

Did you know that you can refinance your mortgage even during the fixation period? For example if you fixed 1-2 years ago and you have rate around 2,8%, these days you can get almost 1% lower and save money every month! Or you can refinance your current mortgage to release equity and get some money out for other investments. We are happy to explain all the details to you personally.

We provide one-stop-shop solution for all expats who already own or are looking to buy a property in the Czech Republic. Feel free to get in touch with Robin at robin@expatsfinance.cz or call 777877849

Expats Finance