Hypoindex: The average mortgage rate fell to 6.27 percent in March

Hypoindex: Average mortgage rate fell to 6.27 percent in March

Construction apartments – illustrative photo.

Prague – The average mortgage rate at the beginning of March fell to 6.27 percent from 6.37 percent in February. This follows from the data of the Fincentra Hypoindex, which is processed on the basis of data on the fifth working day of each month. The methodology reflects the current average mortgage loan offer rate for 80 percent of the property's value. According to experts, the reduction in rates is the result of a competitive battle between banks.

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The rate cut of 0.1 percentage point is the most significant decrease in two years. “Mortgage banks, with a vision of the coming spring and thus the start of the construction season, began to approach their pricing more actively, and in connection with the competitive struggle, some of the banks began to reduce mortgage interest rates,” said a mortgage analyst at Fincentrum & Swiss Life Select Jiří Sýkor.

Average rates for all types of mortgages fell last month. The most significant decrease was for mortgages with a mortgage value of up to 80 percent with a three-year fixation, which fell by 0.15 percentage points to 6.39 percent. Mortgages with a mortgage value of over 80 percent with a three-year fixation also showed the same decrease, the rates of which are now 6.62 percent. The lowest rates now are for mortgages with a mortgage value of up to 80 percent with a ten-year fixation, where they amount to 6.03 percent.

The monthly installment of a mortgage loan for 3.5 million crowns arranged up to 80 percent of the estimated price of the property with a three-year fixation, a maturity of 25 years and an average offer rate of 6.27 percent, it fell by 209 crowns to 23,132 crowns in March. The amount of the average monthly payment thus returned to the level of last summer.

Sýkora does not expect a more significant drop in rates until the Czech National Bank (ČNB) lowers its base interest rate from the current seven percent. “The forecasts for the development of rates for this year are not developing in the best way. Just as the CNB is quietly adjusting its estimates of the development of this year's inflation from 9.1 percent to almost 11 percent, so it can be expected that any rate reductions will also be shifted. And so the original “optimistic estimates for the reduction of basic rates already this fall do not seem very realistic. So if there is a drop in these rates at all this year, we can only expect them at the end of it, or even at the beginning of 2024,” said Sýkora.