At the Board meeting on 5.8.2021 the Czech National Bank decided to increase the 2W Repo rate by 0,25% to 0,75% starting from 6.8.2021, as stated on their website here. Expected inflation for this year is 3% and for 2022 – 2,8%.
This move was expected by the experts and many claim there will be further increase later this year. While the ČNB dropped the rates to a long time minimum in 05/2020 (with reaction to CoVID-19 pandemic), which was followed by lowering mortgage interest rates, current trend since 02/2021 is showing steady increase making mortgages more expensive for customers.
source: http://www.hypoindex.cz/
How will the mortgage rate develop?
This increase by the Czech National Bank anticipates further growth of interest rates for mortgages in the Czech republic. Czech banks had a record year in 2020 for the amount of mortgages provided and since the beginning of the year all banks are charging higher and higher interest rates and yet – the demand for financing is still in its peak.
While we cannot predict the exact direction of the trend, it seems like it is now going to move only one direction in the following months so for everyone who is thinking to refinance in advance, consider doing so rather sooner than later to get rates while they are still under 3%.
What is the Repo rate?
Repo rate refers to the rate at which Central bank borrows money by selling their securities to the regular banks – on short term basis. You can understand this as the maximum interest rate which the Czech National Bank pay to regular banks for taking care of their surplus cash.
Did you know you can refinance your mortgage up to 1-2 years in advance?
Don’t hesitate to get in touch for free advice about getting new mortgage or refinancing your current one.
sources:
(CZ): https://www.idnes.cz/ekonomika/domaci/cnb-sazby-uroky-inflace-zadluzeni.A210805_124854_ekonomika_rts
(EN): https://www.cnb.cz/en/cnb-news/press-releases/CNB-increases-interest-rates-00006/
(CZ): http://www.hypoindex.cz/