How was the mortgage market in February? Waiting for a development in interest rates

The Czech National Bank (ČNB) decided to leave interest rates unchanged. This decision will make it harder for investors to get higher rates. On the other hand it will be easier for the applicants to secure mortgages.

Mortgage rates have increased on average by more than a third but they are still historically at relatively low levels. ČNB decided to not increase the interest rates. This situation may last for a longer period of time. Based on the current forecast of the ČNB is expected to increase interest rates once in the first half of the year or maybe twice depending on certain circumstainces. 

The current decrease of the mortgage rates

Some banks, such as UniCredit Bank, decided to decrease their interest rates. The others, such as Hypotecni banka, mBank or Moneta also decided to decrease their interest rates for limited time periods, which they have selectively extended. This is expected to decrease interest rates especially during the spring mortgage campaigns promoted by the banks. 

The early repayment of the mortgage should be cheaper

ČNB decided to ban some of the fees that bank are charging for the early repayment of the mortgages. According to the ČNB, banks can charge only the fees that are specific to the early repayment of the mortgage loan. ČNB will explicitly define the type of fees that banks will be able to charge in the future when clients want to repay the mortgage loan within the fixation period.

The predictable consequense of these cheaper fees for early mortgage repayment will be higher interest rates for mortgage loans. According to the banks, the lower early repayment fees will have to be reflected somewhere and this will necessarily result in higher interest rates.

The consequences of DTI and DSTI parameters

A third of applicants in Prague don´t fulfill the new conditions for getting a mortgage loan. The reason is that the price of houses and apartments in Prague and other large cities is exessively high. When applying for a loan, banks have to check the net income and a total debt of the applicant. If we add the new ČNB DTI and DSTI parameters where the total amount of the applicant´s total debt cannot exceed is nine times his/her annual income, and monthly payments of all debts that the applicant cannot exceed is 45% of their monthly income. This means that some people living in Prague might have a problem to get the mortgage loan. On the other hand in other regions, such as Ústecký or Pardubický, there is a higher chance for the applicants to be approved.