The Housing Loans Market has Frozen

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Banks and building societies provided loans worth CZK 14.5 billion during February. Compared to last year, the volume of housing loans decreased by 32 percent. A noticeable decline is visible in both building savings and mortgages. What are the reasons and how long will this cooling take?


When will the recovery come?


After the very successful years of 2016 – 2018, the housing loans market is returning to the long-term normal. Market participants – banks, clients and intermediaries “get used to the new rules”. There are no reasons for a major market freeze. The economy is still working very well, and the housing loan market will also recover.

A very good impulse for restarting demand may be the current decline in interest rates , while banks have not yet used up room for further rate cuts. Maybe they save ammunition for regular spring events.


Mortgage rates start again with 2


Mortgage offer rates have been falling for two months in a row . The primary impulse, which opened the door for a decline in mortgage rates, was a significant decline in rates on the bank market, which occurred at the end of last year. Banks thus cheaper money on entry and gradually began to reduce mortgage rates. Both GOFI indexes 70 and 80 returned to 3 percent in January and February, however, creditworthy clients could actually get a mortgage with a rate of around 2.60% . The average realization rate (green in the graph), according to the data published, fell by 1 hundredth of a percentage point to 2.99% in February. Implementation rates in the coming months will be followed by a decline in bid rates.

Building societies are also in decline

Building societies are also in decline

CNB regulation at the end of last year is also reflected in the results of savings banks . This is aimed at secured loans and it is clear from the decline in the average loan amount that credit production fell just for these types of loans. Another indication is the higher year-on-year decline in output from building societies with a higher proportion of secured loans and a smaller fall in WSS, which mainly provides unsecured loans.

The CNB and its opinion on the cost-effectiveness


In the medium term, a large question mark now represents how banks respond to the CNB’s opinion on the calculation of the early repayment fee . Given that this position puts them at a disadvantage from the point of view of interest costs, there is a risk that this fact will be reflected in a certain (un) willingness to lower interest rates or to move them towards more fundamental changes, whose impact cannot be estimated yet.

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