Czech National Bank increases interest rates, mortgages will be more expensive
August 16, 2021
The Bank Board of the Czech National Bank ("CNB") raised the basic interest rate for the second time this summer, which is now running at 0.75 percent. The level of the basic interest rate also affects the rate of mortgage loans. Mortgages will thus most likely become more expensive in the future.
By its decision, the CNB confirmed its expectations regarding the increase in the base rate. After more than a year of declining rates, the situation reversed this spring and interest rates began to rise sharply. The prices of basic inputs are rising as well, including building materials. The future rise in real estate prices may be largely conditioned by the current prices of raw materials that will be used in construction.
The CNB justifies the rise in interest rates by returning interest rates to pre-pandemic levels, as low rates were intended to support the economy, especially in times of crisis. Banks are already raising interest rates on new mortgages. Only exception is the ČSOB Group, others have decided to increase their rates and prices.
Current situation on the Czech Mortgage and Real Estate Market in the middle of the year
July 14, 2021
At the beginning of the year, the average mortgage interest rate reached its minimum. The one-year gradual reduction of interest rates ended this spring and rates are starting to rise again. However, their growth is now hampered by competition between banks.
The Czech National Bank (CNB) also raised interest rates in June; therefore further increases in mortgage rates can be expected in the future as well. The rise in interest rates meant only a slight decline in interest in mortgages, which was a record due to low rates. CNB has currently raised interest rates by 0.25%, mainly due to rising inflation in the Czech Republic and negative consumer inflation expectations.
At the same time, the CNB admits that the price of real estate on the Czech real estate market could be significantly overestimated. In the last year alone, according to statistics, the price of real estate has risen by 12% year-on-year. After Hungary and Luxembourg, the increase in housing unit prices in the Czech Republic was the highest in the entire European Union.
Non-declining interest in real estate and ever-increasing inflation will encourage further price increases in the future. This situation is also caused by the fact that supply lags behind demand in the long run.
The Czech National Bank will have new legal authority to determine the rules for mortgages
June 9, 2021
The amendment to the Act on the Czech National Bank ("CNB") was signed by the Czech president at the beginning of June. The CNB will thus acquire the statutory power to adjust the parameters for providing mortgage loans. Until now, the central bank could only issue recommendations which, despite their legal unenforceability, the banking institutions followed.
When the amendment becomes effective, the central bank will be able to determine the key parameters that banks have to follow when providing mortgage loans. These are the indicator of the amount of the mortgage loan to the value of the mortgaged property (LTV), the indicator of the amount of the loan repayment to the applicant's total monthly income (DSTI) and the indicator of the total debt to the applicant's annual income (DTI).
The CNB will now be able to set upper limits, either for one or more indicators at a time. In reality, after the law enters into force, the central bank could increase the percentage of applicant's own funds from the current 10 percent to 15 to 20 percent of the total value of the property (if needed). Rising rates are already starting to hinder enormous interest in mortgage loans. An increase in the co-participation in a mortgage loan could mean a significant decrease in interest in new loans in the future.
The banks are overloaded with mortgage loan applications
May 12, 2021
Unprecedented interest in mortgage loans continues despite the recent rise of interest rates. According to the research, up to 13% of all inhabitants of the Czech Republic are considering applying for a mortgage loan. The huge interest in mortgages is probably caused by rising interest rates and concerns about higher inflation rates.
Many banks are unable to process such a high number of mortgage applications, therefore the mortgage processing might be prolonged by a period of weeks. Slower approval process of the mortgage application may have a negative effect on the timely fulfillment of obligations arising from the reservation contract, purchase contract, etc. In this situation, it is necessary to take into account the length of mortgage processing and adjust contractual terms. In case of smaller banks, applicants can wait up to a month to assess a mortgage application. Even after that, it can take another few weeks to process the loan documentation. If you prefer to know your timeline and meet all deadlines feel free to contact us.
Volume of mortgage loans provided for 2021 first quarter exceeded 100 billions CZK
April 29, 2021
At the beginning of the year, there was an unusually great interest in mortgage loans in the Czech Republic. Starting from March 2020, interest rates were sharply falling due to the coronavirus crisis. As this aspect affects mortgage interests of the customers, the applicants had a strong interest in applying for new mortgages and refinancing old mortgages. Decline of average mortgage interest rate continued at the beginning of this despite the expectations of an increase in the interest rates.
After a year of continued reduction in interest rates, the mortgage market witnessed a slight increase. The interest rates are expected to continue to rise and many financial institutions have already adjusted their mortgage supply rates.
Not only was the volume of leased money reached a record level, but also the number of newly agreed loans was extremely high. Just during this March over 14 thousands of new mortgages were closed. The upwards trend of closed mortgages that have started last spring continues to the present and will be most likely stopped only by rise in interest rates.
Can I get a mortgage loan online in the Czech Republic?
March 24, 2021
Previously, closing a mortgage loan would not be possible without personal meetings, signing a number of documents and, in some cases, time-consuming administration. However, given the situation, banks are coming up with the transformation of their services into online platforms. This also applies to mortgage loans. Although it is not yet possible to arrange a mortgage exclusively online, a large part of the process can already be done without a personal presence.
What can be arranged online? Initially, all mortgage calculations can be made online and details can be agreed through e-mail communication, calls or online meetings. The selection of suitable financing and the preparation of the mortgage application can be done online, but the signature on the application must be done in person. Newly, some banks already allow online processing of the income confirmation that each applicant has to submit. The approval of the loan application and the preparation of contractual documentation also take place online, but the final signatures will not be possible without your physical presence. Feel free to contact us for more details.
Mortgage Questions You Should Know the Answer To
February 22, 2021
Property purchase and mortgage loan can evoke lots of questions for many of us. Having the right answers could mean reducing both the stress and the cost.
1. How much can I borrow?
This might be a burning question, because this affects the type of property that you can afford. This generally depends on your income, type of income; other loans you have and on the amount of money that you have saved. Remember that the purchase price is not the final price, but it is close to that. Other charges can grow just up to CZK 20,000 in general.
2. What documentation should I gather?
To apply for the mortgage prepare the following document. Sometimes you might be asked to submit additional documents.
ID (in Czech: Občanský průkaz) and passport or driving license
Proof of your citizenship or permanent residence permit
Proof of your income or tax reclamation (your income has to originate in Czech Republic)
3. How long does it take to close a mortgage?
Even though there is no definitive answer to this question, the average time to close a mortgage for an apartment purchase is around 15 - 40 days. Many factors and your individual circumstances frame the total time needed. You can shorten this time by preparing all required documents.
4. What is LTV?
The loan to value or LTV is the amount of money you borrow from the bank compared to the purchase price of the property. Maximum LTV allowed in the Czech Republic is 90% LTV. However, the most common are 80% mortgages in the Czech Republic.
5. How much should you save for a down payment?
It is required to have at least 10% of the purchase price, but in most cases applicants have 20% (or even more).
If you have any other questions, don't hesitate to contact us.
The interest rates in the new year 2021
January 14, 2021
The Interest rates have fallen sharply over the past year, but will they be the same this year?
At the end of 2020, the average interest rate on mortgage loans fell below 2% in the Czech Republic, but prices of the real estate have not fallen as many experts expected. At the beginning of the new year, interest rates should remain at the current low level. However, another significant decline is less likely, stagnation or a slight increase in rates is more realistic. Currently we do mortgages for our clients with the interest rate starting at 1.69%.
The further development of mortgage rates will be influenced by the performance of the Czech economy, real estate prices and other factors. The development of interest rates is also affected by the level of other rates, which are regulated by the Czech National Bank. An increase in those interest rates or stricter conditions for mortgage loans cannot be ruled out.
Real estate prices are not expected to fall this year either, although price growth should be slower than as it was during the previous years. A maximum of 5% growth of the apartment prices for the year 2021 is expected.
Czech Real estate development in 2020
December 14, 2020
Are you wondering how the coronavirus affected the real estate market in the Czech Republic? Read bellow a brief overview of Czech real estate market.
At the beginning of this year many forecasted prices of real estate to fall as they thought there will be many people selling their properties. However, the actual situation is quite different. Except in rare cases, there was no significant increase in the properties offered on the market.
What happened was that selling prices continued to grow, albeit in slower pace. The reason for this is insufficient supply of real estate and the crisis made it even worst as there was lower output of construction industry this year.
Shortage of offered real estate is pushing selling prices up as the demand is still higher than offer. Mortgage loan market is affected by the economic situation as well as by the situation on real estate market. Therefore we have witnessed a sharp decline in interest rates this year. Another important aspect an impact on mortgage and real estate market was abolition of 4% real estate transfer tax.
The interest rates of mortgages are falling and demand is rising
November 23, 2020
Due to the corona virus crisis at the beginning of this spring, many real estate brokers and financial experts expected real estate prices to fall due to lower demand for housing and lower demand for mortgage loans. However, we have not witnessed significant decline in property prices.
The desire for real estate ownership did not pass even during the crisis. On the contrary, it was supported by the abolition of the real estate acquisition tax and a fall in mortgage interest rates. However, the coronavirus crisis had a negative impact on output of the construction industry, which will affect the price of real estates. There is still a shortage of apartments, especially in the capital, and the demand for them is really high. The combination of high demand with a decline in newly completed dwellings is putting pressure on real estate's prices.
In times of financial uncertainty, people and investors may perceive real estate as a safe investment and tend not to postpone real estate purchase any longer. This is also affected by abolition of real estate acquisition tax and low interest rates in the Czech Republic. Mortgages fell sharply during this autumn with interest rates below 2%.
The real estate transfer tax has been officially abolished in the Czech Republic and property purchase has therefore become cheaper
October 13, 2020
Before the cancelation the buyers had been subject to the 4 % tax rate of the tax base (known as real estate transfer tax). The tax base was usually the purchase price of the property you were buying. As it is no longer applicable you can save for example CZK 200,000 when purchasing a CZK 5,000,000 worth property.
Buying an apartment or house in the Czech Republic is nowadays really affordable considering the side costs. Beside the down payment for the mortgage loan (which is at least 10% of the property price) the buyers need just about CZK 5,000 - 10,000 as an ancillary costs (e.g. for bank´s evaluation, lawyer or escrow).
Low side costs together with favorable mortgage interest rates create interesting opportunities for home buyers or even for investors.
The summer decline of interest rates continues in early autumn
September 23, 2020
The average interest rate on mortgage loans is currently 2.15 percent. The present average interest rate is at the same level as it was in November 2017.
Compared to this year's spring, when we experienced a very sharp drop in rates due to the spread of coronavirus, current rates are declining at a slower pace. Although the declining trend is expected to continue, the situation may be changed by rising interbank rates and by the threat of upward pressure on inflation.
Subsequent development of interest rates depends on the state of the economy and its recovery from the crisis caused by the global coronavirus pandemic. Interesting special offers for mortgage loans perhaps can be expected in case of positive development of health situation and economics. Interest rates can be negatively affected by a situation of a rising number of clients who will not be able to repay their loans. Another reason for raising the interest rates may be the rising rate on the interbank money market. At simple terms this means that the costs of financial resources from which banks provide mortgage loans to their clients have increased.
Despite the tightening of conditions on mortgage applicants, interest rates are still gradually falling and thus mortgages are becoming cheaper. The current low rates are advantageous for clients who are currently considering purchasing real estate.
Can companies obtain a mortgage in the Czech Republic? And is there any difference between a mortgage loan for a person and for a company?
August 27, 2020
In the Czech Republic, a legal person can also apply for a mortgage loan / business loan for a property. Not only existing companies can apply but also a newly established business company, the main business activity of which will be renting of the purchased real estate. Purpose of the business mortgage will be the same as it would be for the personal mortgage loan, which may be the purchase of real estate or its reconstruction.
The procedure for obtaining financing is to a great extent the same, first calculations are made, then pre-scoring is conducted, an application is written and, if the application is approved by the bank, a loan is provided to the company.
Unlike for mortgages provided to natural persons, a loan for a company may differ in the proportion of down payment and money provided by the bank. For natural persons it is common that the applicants have their own resources only in the amount of 10 % of the purchase price. For legal entities, the required percentage of own funds may be higher. Banks may require down payment for the mortgage in the amount 20 % to 50 % of purchase price of the property.
If your company is considering purchasing a property and you would like to consult your investment project with a mortgage specialist, do not hesitate to contact us and arrange a free consultation.
The Chamber of Deputies approved the abolition of real estate transfer tax
July 29, 2020
The abolition of real estate transfer tax in the Czech Republic has already been the subject of discussion several times. However, during the coronavirus crisis, the pressure to cancel the tax increased to the point, where the government approved the draft law on transfer tax abolition in May. The proposal to abolish the real estate transfer tax with 4% tax rate of the total purchase price was approved by the Chamber of Deputies, and the proposal will then be forwarded to the Senate for voting. After that the Senate will have 30 days to discuss it and vote.
Drafting proposal maintained the tax deduction of interest rates. Tax deduction of the total paid interest will be possible up to the maximum of CZK 150,000. This amount represents half of the current maximum amount that can be deducted from taxes. The new limit for interest deduction will be applicable to loans signed after January 1, 2022.
The draft law not only includes the tax abolition, but also includes a new time test for the payment of income tax on the sale of real estate. The test will be extended from the original 5 years to 10 years of property ownership. The extended time test will be valid for properties acquired from 1 January 2021.
The abolition of the property transfer tax should help the real estate market in times of crisis. Future development of the real estate and mortgage market will also depend on the development of the coronavirus situation. In case of a positive development, mortgage applicants could look forward to interesting offers from banks. Otherwise there is a risk of reintroducing stricter criteria for mortgage applicants.
June´s update: News from the Czech mortgage market
June 24, 2020
Abolishment of the real estate transfer tax
The real estate transfer tax is supposed to be canceled as the draft law was further discussed during the meeting of Czech Chamber of Deputies. This change would mean that buyers are no longer subject to the 4 % tax rate of the tax base. Tax base was usually the purchase price of the property you were buying.
Decline of Interest Rates
Due to the pandemic Czech banks sharply declined interest rates of mortgage loans. The average interest rate is running at 2.30% nowadays. Currently we are able to get the interest rate below 2% p.a. for our clients!
Mortgage Loans Requirements
It is important to mention that the limitations introduced during the pandemic are still in force, but things are slowly getting back to normal as the health situation is safe and stable in the Czech Republic.
Czech Government Abolished Property Acquisition Tax; what does it mean for property purchasers?
May 18, 2020
Abolishment of the real estate transfer tax have been officially announced by the Government of the Czech Republic. This decision might be crucial for those who have been hesitating to purchase the property.
This tax was levied in respect of the acquisition of the immovable property located in the Czech Republic. This means that buyer had been subject to the 4 % tax rate of the tax base. Tax base was usually purchase price of the property you were buying.
The reason Czech Government decide to abolish the tax is to help the economy in times of crisis. When purchasers are not obliged to pay the tax, they can spend the money on something else. For example they can buy more expensive property or they use the money as a down payment for the mortgage loan.
Let's suppose that the purchase price of the apartment in Prague is CZK 5,300,000. Before the abolishment you would have to pay the tax which means extra CZK 212,000. In case you pay the purchase price with the borrowed money from the bank, you would be asked by the bank to have another CZK 530,000 as a down payment for the mortgage loan. To sum it up, to buy a CZK 5,300,000 property in Czech Republic you needed at least CZK 742,000 from your own savings.
Nowadays you need only 10%, i.e. CZK 530,000 which means more people can afford to buy their own apartment or house. What if you already have the abovementioned CZK 742,000? You can use the sum as a down payment for the mortgage loan and bank might borrow you additional CZK 6,678,000, therefore you can purchase a property for market price up to the CZK 7,420,000. If you are looking for best mortgage loan to buy your property, don't hesitate to contact us!
Czech National Bank in reaction to the coronavirus spreading has adjusted the conditions for mortgage lending
April 16, 2020
After the Board of the CNB decided to liberalize some of the limits last week, more applicants have higher chance to fulfill the requirements for obtaining the mortgage loan.
Following measures were changed:
- Loan to value indicator LTV was increased up to the 90% (from 80%). It means bank will borrow you 90% of the purchase price of the property, therefore you required to have only 10% of your own savings.
- The upper limit on the debt service-to-income DSTI ratio is nowadays 50% (before it was 45%). Successful mortgage applicants should not be spending more than 50% of their net monthly income on loan repayments.
- Limit on the debt-to-income ratios DTI is no longer applicable. Before the pandemic applicant's their overall debt should not exceed nine times their net annual income.
In order to prop up the Czech economy affected by the pandemic, CNB not only reduced the standard mortgage requirements, but also reduced base interest rate twice within March.
Also some commercial banks reacted to basic
interest rate reduction by lowering their mortgage interest rates and offering
favorable mortgage loans.
Cheaper mortgages can be expected this spring
March 19, 2020
Even this spring increase of interest rate is not expected due to the current health situation. Although we were expecting interest rates to increase early this year, coronavirus have changed the situation on financial markets. The sharp decline of interest rates on interbank market affected price of money which means mortgage loans will be cheaper.
Many countries around the world are dropping key interest rates as they are trying to fight the economic slowdown caused by coronavirus spreading. Early this week the Czech National Bank (CNB) reduced base interest rate by 0.50 to 1.75 percent. This precaution was implemented in order to minimalize negative effect on the economy.
Nowadays prognosis indicates that there will be 20% - 40% decline in total revenues; therefore the CNB reduced the base rate to support economy and business. When interest rates are reduced, cheaper mortgage loans will be offered by banks, therefore we are expecting favorable mortgages offers this spring. This situation might be beneficial for those who are considering house or apartment purchase during forthcoming months.
What is the average cost per square meter of property in the European main cities?
February 18, 2020
Looking to purchase a new apartment? If you are dreaming about purchasing an apartment in one of the main European cities, than we have a short price per square meter comparison. Find an average price per square meter of property in eight cities.
The average price per square meter showed below consists of average price in city centres and outside of the centres. In some cities like Paris, London or Stockholm the price in the city centre and outside may differs a lot, in other cities the price difference is not that significant.
- Amsterdam: EUR 6,393
- Berlin: EUR 4,888
- London: EUR 11,729
- Madrid: EUR 4,102
- Paris: EUR 9,870
- Prague: EUR 4,278
- Rome: EUR 4,634
- Stockholm: EUR 6,933
- Vienna: EUR 5,358
Before you decide on the area you want to buy an apartment, research the market to make you are getting value for money. If you need a help while looking for the best apartment for you, do not hesitate to contact us.
These data are based on property owner's entries in the past 12 - 18 months.
Mortgage Interest tax deduction in the Czech Republic
January 17, 2020
Are you paying a loan and wondering how the deduction of interests works? Tax deduction can be conducted while you are submitting periodic tax declarations. The mortgage interest deduction is offered as an incentive for a natural person - an employee or self-employed person. Paid interests are deductible from income tax base. This means your tax base will be lower and you will pay less than without the interest deduction. You are allow to deduct paid interest in maximum amount of CZK 300,000 per year. With a 15 % income tax rate you can save up to CZK 45,000 per year.
Qualifications for a Full Mortgage Interest Deduction:
- You are obliged to be a contracting party. Contracting party in this case is a natural person - an employee or self-employed person.
- Specification of person who is receiving the loan. It does not have to be you, but the loan should receive the person close to you. It means family member such as siblings, parents, husband, wife or a person you are living with.
- Purpose of the mortgage loan as it has to be provided for housing needs. It means the mortgage loan was provided for the purpose of house or apartment purchase, reconstruction, remuneration for the share on private dwelling or other purposes connected with housing.
Young singles are increasing demand for apartments and mortgages
November 11, 2019
Growing interest in apartments in Prague is accompanied by rising popularity of single living. Recent data provided by the Czech Statistical Office suggests that in Prague 22% of women and 17% of men are living single. The largest housing developer in the Czech Republic (Central Group) confirmed this trend. While until 2010 men had been buying new houses or apartments, since 2015 this trend has reverted. Women are buying new houses/apartments more often than men.
Woman are prioritizing small apartments as it gives them not only higher chance to obtain mortgage loan, but it will also ensure the ageing well. Michaela Tomášková, Central Group CEO explains: "Women think about the future more than man do, owning the property provides them certain level of guarantees and suitable way for maintaining living standards in old age. In addition, owning the property proves the economic independence of women." (source: Nový byt v Praze kupují nejčastěji ženy ve věku 40 let. Trh určují hlavně singles - Central Group 2019, Prague).
Young single people take out nearly a half of mortgage loans granted in Czechia, with men deciding to invest in their housing at the age of 36 and women a year later, according to data of UniCredit Bank. Male singles borrow an average CZK 2m and female singles' loans are CZK 300k lower on average, said UniCredit Bank's Petr Plocek (source: Singles take out almost half of mortgages in CR - UniCredit Bank 2019, Prague).
Couples are provided with loans worth CZK 2.3m on average. If you want to identify possibilities for obtaining mortgage loan, don't hesitate to contact us!
Discover the best offers for the autumn season and get a mortgage in the Czech Republic!
October 7, 2019
At the end of the summer drops in interest rates have occured. This overall trend was concomitant to an accentuated reduction in the interest rate of the mortgage loans. Moreover, demand in new mortgage loans has decreased in 2019 compared to 2018 and 2017.
The Czech banks reacted to declines in demand and interest rates by special mortgage loan offers. Lower interest rates and easier approval conditions are the main reasons for getting a loan for property purchase. During the autumn season clients could benefit not just from no fees for valuation of property. Loan processing and loan account maintenance are also being offered free of charge currently.
Foreigners in the Czech republic will have easier access to mortgages
August 20, 2019
One of the Czech bank came out with a new mortgage product exclusively for foreigners. From now on they no longer have to have any type of residence in Czech republic in order to apply for a mortgage. Currently the only requirement is to prove that they have an income in Czech republic for two years. This new product will be helpful for expats working in the Czech Republic.
Applying for a mortgage these days is very convenient since banks are still trying to entice clients by offering them better terms and conditions. Even though the Czech National Bank has increased the prime rate this year the interest rates of mortgages offered by the banks are still decreasing.
The lower interest rates on Czech market will continue
July 23, 2019
According to the latest news the Czech National Bank ("CNB") hasn´t changed the interest rates. We can expect the interest rates to be the same or lower during the summer and in the second part of this year.
The soon to be presented novelty - amendment to the Act by the CNB which could help younger people, those under 36 years of the age to get a mortgage. These young people could apply for a 90% LTV mortgage or could be offered better interest rates.
Currently, the banks can standartly offer 80% LTV mortgages and in it is very rare for banks to offer 90% LTV mortgages. About these exeptional clients the banks are deciding by themselves. The only condition is that the overall 90% LTV mortgages can not exceed 15% of the total money lent.
The interest rates of mortgages are decresing!
June 13, 2019
The interest rates of mortgage loans are still decreasing due to special offers from the banks. The mortgage demand had decreased since the start of 2019 and banks are trying to keep their clients and get new ones. Their other offer is the possibility to get a mortgage with a long fixation period with much better interest rate.
Many banks, such as Ceska Sporitelna, CSOB, or UniCredit Bank, are offering a fixation period for long-term such as ten years, fifteen or even twenty years.
The Czech National Bank has increased the interest rates which still has not projected on the interest rates of the banks.
Ceska sporitelna has a novelty where people buying their fist property can get better conditions when applying for a mortgage. Nowadays they can get a mortgage loan up to 90% of the purchase price. All they need to do is to go to the Land Registry Office and prove that they don´t own any property.
Currently there are also many interesting campaigns from other big banks such as Komercni banka, Hypotecni banka or Raiffeisenbank.
Feel free to ask us for the solution which would just suit your needs!
Many banks extended their special offers and the mortgages have better conditions now
May 15, 2019
Many banks extended their campaigns and they are still offering mortgage loans for better conditions. This situation should be the same the whole May.
The major change happened recently, when the Czech National Bank increased the prime rate finally. However, the pressure of competition between banks and the interest of the banks to sell more mortgage loans still keeps the interest rates low, but there is a possibility of an increase in interest rates at the end of May or in the beginning of June.
That can cause a problem mainly in large cities, such as Prague, where is a very small supply of apartments which are
demanded. The Czech economic is starting to slow down a bit so the interest rates might stay on current leven for a while.
The Czech National Bank hasn´t increased the prime rate, mortgages for younger people should be more affordable
April 17, 2019
In the last the Czech National Bank ("CNB") meeting on 28th of March it was decided not to increase the prime rate. In the first quater of 2019 the production of mortgages for housing has decreased by 32% . The main reason of this huge decrease is the current availability to get a mortgage since the new CNB DTI and DSTI restrictions. Due to this decision the interest rates of banks are still decreasing.
There is an amendment to the Act on the Czech National Bank in the process which could help younger people to get a mortgage. People under 36 years could get better conditions when getting a mortgage. For example they will be able to apply for a 100% LTV mortgage with 50% DSTI parameter or they will be able to get the mortgage despite their lower net income. If this novelty will be accepted it will apply only to the people applying for a mortgage only for a housing purpose.
The Czech National Bank has decided to reduce banks´ fees on mortgages
March 20, 2019
Czech National Bank has decided to ban some of the fees on early repayment of the mortgages. This regulation should help arrange better conditions for applicants for a mortgage.
Currently the banks can only charge:
- Fees associated with the early repayment of a mortgage and these need to be reasonable and related to the costs of the repayment directly.
- These fees include administration, postage, copying documentation, the fees for providing a mortgage or the fees for evaluation.
Overview of current mortgage conditions for foreigners on the Czech market
February 28, 2019
Most of the expats and foreigners ask if they are able to get a mortgage in the Czech Republic and what are the current conditions. Here is a brief overview what you can expect:
- Most common LTV "loan to value" is 80% LTV, however it is also possible to get 90% mortgage at some cases.
- The interest rates are same as for the locals.
- Temporary or permanent residency is more than welcome but not necessary.
- Income from the Czech Republic is a good advantage, but the banks accept also income from abroad, especially if you are an employee.
- If you ask for a mortgage with Czech citizen (e.g. with a partner, husband or wife) it would help a lot.
Generally, if you have a stable income and 20% downpayment you will be able to get a mortgage in the Czech Republic. Please note that the banks´ conditions are very individual but we are here to help you to choose the right solution.
The forecast of Czech mortgage and Real Estate market for this year
January 31, 2019
The year 2019 has already started and we provide you with our prediction for the upcoming months. Let´s start with the Czech mortgage market first.
Last year we noticed significant increasing trend of bank´s interest rates due to the rising by the Czech National Bank. Currently the interest rates of mortgage are attacking 3% p.a. Thus, it has to be said that the current rates are still quite low if we look at it from a long-term perspective. We could say that the interest rates are still "better than average" nowadays.
And what about the Czech Real Estate market?
The properties had very fast increasing trend within the end of the last year, especially in Prague, the capital city. The real estate market in Prague is driven by high demand and we expect that the increasing trend will continue slowly also this year. Based on the current macroeconomics data we do not expect any downtrend or crash of the Prague real estate market.
Finally, it is important to mentioned that you can still find very suitable properties with friendly conditions of financing so feel free to contact us or arrange a meeting with us. We will be happy to discuss the financing with you.
Why to obtain a mortgage for a company? What are the advantages?
December 27, 2018
If you are looking for an investment property and financing in the Czech Republic it might be helpful to consider if to obtain a personal mortgage for a personal property or if rather buy a property for a company. There are many aspects that should be considered. The main advantages why to buy a property for a company are below:
- If you buy a company which owns a property instead of buying a standard property you will save 4% from the purchase price for real estate transfer tax.
- You will save on accounting effect, i.e. depreciation of a property.
- Most of the costs for repairements and related services are tax deductible.
- You could get very good mortgage conditions also for foreigners withnout any residency or income in the Czech Republic.
- Your property will be in a separated ownership from your personal assets.
This kind of buying property and financing became very popular and we will be happy to help you and advice in your particular situation.
The interest rates of mortgages are rising again
November 6, 2018
The Czech National Bank has already rised the interest rates 5-times during this year. The last increasing by 0.25% (which is the same incresing than in the previous cases) was confirmed on November 1, 2018 last week.
Previously the Czech National Bank rised interest rates also on September 27, August 3, June 28 and February 2 this year.
These increases have direct impact on increasing the mortgage interest rates that are attacking the 3% p.a. nowadays. Generally the interest rates are still acceptable in a long-term view, but we must admit that the rates below 2% p.a. are already just a history.
If you would like to get individual banks´ offers and conditions feel free to contact us.
Overview of mortgage solutions for foreigners
September 20, 2018
The summer brings new approach to the mortgage financing for foreigners in the Czech Republic. What are the current options and how to get a financing for your property?
Generally there are three ways of financing that we use with our clients:
- Banking mortgage loan;
- Business mortgage loan, i.e. mortgage on a company; and
- Non-banking mortgage loan.
Of course that the best conditions, i.e. the lowest interest rates and lowest fees have standard banking mortgages. However, there are some cases where you are not able to get a banking mortgage. At this case it is good to know that there are also business mortgages for a company which could be for a new established Czech company (SPV). Moreover, we have a cooperation with several non-banking providers so this might be a solution for your financing as well.
The market conditions are less clear than before so feel free to contact us.
Since October 1, 2018 the new restrictions will be valid on the mortgages
June 26, 2018
The Czech mortgage market has changed a lot within past months. And, unfortunately some new changes are coming.
New restrictions from Czech National Bank will be effective on October 1, 2018. There will be two new limits for mortgage applicants:
- maximum loan amount will be 9-times of annual net income (DTI ratio); and
- maximum loan instalment cannot exceed 45% of the net monthly income (DSTI ratio).
The banks will have to consider more deaply the income of applicants and household and check these two ratios as well. However, there are few cases where the new limits will not be applied.
In practise it means that you would need to have very good income or higher amount of your own savings that you will use as a deposit for your mortgage.
In these days it is more important than earlier to have a professional mortgage broker who knows the conditions of the Czech market and could help you to reach the best mortgage.
Remember to pay property tax
May 30, 2018
If you own a property in the Czech Republic you are obliged to pay a property tax for another year by 31 May 2018. If you paid later (after 5 June 2018) you would receive a penalty from the Czech Tax Authority.
Regarding the payment details you should received a notice e.g. via email or letter within the past weeks. There should be mentioned the amount of your property tax and bank account details as well.
Generaly the property tax has to be paid for apartments, houses, villas, lands and some other properties so if you have not done the payment yet do it as soon as possible.
Spring campaigns have already started!
April 10, 2018
Every year the Czech banks attract potential clients to the banks. The spring campaigns have already started. What is the benefit for clients?
Currently the banks usually offer:
- property evaluation free of charge;
- special interest rates;
- one-time financial bonuses; or
- processing the mortgage free of charge
Generally the interest rates are going up so do not miss the current special spring offers!
The Czech National Bank has raised the interest rates since 2 February 2018
February 2, 2018
The Czech National Bank raised the key interest rate (2T repo) by 0.25%
according to analysts expectation. The impact on interest rates on
mortgages can be expected very soon.
Third rate increases over the last 7 months
After August and November rallies, the Board of Czech National Bank approached a further increase of interest rates on 1 February 2018. This step has been expected since December last year, so it is more a confirmation of earlier forecasts than a surprise for the market.
Banks are increasing interest rates significantly
Some banks have been expecting this step, and have changed their interest rates as early as February 1, 2018. For others, the price is likely to follow in most days or weeks.
Two more times this year
According to forecasts, the Czech National Bank could raise interest rates by a similar value two more times this year. The most likely one is to expect a further increase in the spring, e.g. in May and then in autumn, about October.
However, the Czech banks offer still very friendly mortgage conditions and also for the foreign citizens!
Do not forget to file a Tax Return from real estate
January 23, 2018
If you buy e.g. a land, flat, cottage or apartment within the last year 2017 you will be required to file a property tax return.
The deadline is on January 31, 2018 so you have only few more days!
Once you file the tax return you have few months for paying the real estate tax. The deadline for the payment is set on May 31, 2018.
If you solve this tax return or financing feel free to contact us.
Mortgages will be still available on the Czech market next year
December 21, 2017
The fact is that the Czech mortgage market has changed a lot within a few past months. We have new Act related to the loans started 1 December 2016, the payer of real estate transfer tax is the buyer (previously it was the seller) and the Czech National Bank increased basic interest rates twice this year.
Despite all of this the mortgages are still very available on the Czech mortgage market and this situation should continue during the next year 2018.
Feel free to contact us and ask us for more details about the financing.
Interest rates will continue to grow, fix your interest rate in time!
November 22, 2017
On 2nd November 2017 the Czech National Bank increased the general interest rates by 0.25% again. The Czech banks will not wait with increasing the interest rate of the mortgages.
Currently it is possible to get a mortgage loan with the interest rate of 1.79% p.a. for a shorter fixation period. Nevertheless, the interest rates will be above 2% p.a. in average next year.
If you plan to buy a property, do a reconstruction or refinance your current mortgage loan we would advise you to start immediately and fix the lower interest rates in time.
It could happen that the interests will attack 2.5% p.a. during the next year.
Contact us right now and we will find the solution for you.
The real estate price growth could stop soon
October 26, 2017
Probably you have noticed that the prices of apartments grew in few past years, especially in Prague. The increasing trend was very significant. The prices of the new apartments in Prague grew by 21.50% in the last 24 months. Currently it seems that the peak could be really close.
Many analysts predict the cooling of the real estate market in the next year 2018. On the other hand the demand is still very strong especially in attractive locations.
To sum up if you are going to sell the property in the Czech Republic you have the best time to do it nowadays.
Czech National Bank increased the interest rates and it has already impact on the mortgages
September 5, 2017
At the beginning of August Czech National Bank increased the interest rates after almost 10 years of declining and stagnating trend. The incresing was not too much significant - only 0.20%.
However, the banks as mortgage providers have already reacted on this change and increased the interest rates. Some banks are still waiting on another market change, but it is very likely that the other banks will follow these banks during the upcoming months.
The market conditions remain still very positive and friendly, but it seems that the stable trend has already changed and we can expect a new trend of slightly increasing interest rates.
The interest rates are still below 2% p.a.
July 25, 2017
The interest rates of our clients are still below 2% p.a. The several last clients achieved the interest rates in the range between 1.79% p.a. and 1.89% p.a. which is great result due to the slightly increasing trend of the interest rates in the past months.
Generally the average interest rates are around 2% p.a. on the Czech mortgage market so the conditions remain very positive also in comparison to other European countries.
The forecasts of the interest rates agree that the slow increasing trend should continue in the second half of this year and the upcoming year as well.
To sum up the market conditions are still very friendly to the new clients nowadays.
Czech mortgage market could change soon
June 13, 2017
If you live in the Czech Republic you probably noticed the discussion about another new regulation on the Czech mortgage market and real estate market.
The Czech National Bank is afraid of overheating the Czech real estate market and they seek to gain greater regulatory powers. Currently this discussion is on a daily basis.
Fortunately, this regulation should not have a direct impact on the foreigners who would like to get a mortgage in the Czech Republic.
Nevertheless, it might be better to start with the mortgage process sooner rather than later and prepare the financing in advance. We will keep you updated if any changes would come.
Feel free to contact us in this respect.
Few simple steps to get a mortgage
May 11, 2017
Do you thinking about getting the mortgage loan in the Czech Republic? If you follow the below mentioned step plan it could be easier for you to orientate yourself on the Czech mortgage and real estate market:
1) Meet the Mortgage specialist - Mortgage specialist will help you to understand the whole process, compare the banks´ offers and will guide you during the transaction to the successful end.
2) Choose the right mortgage for you - Would you like to have 80% LTV mortgage or 90% LTV mortgage? Do you want to have a shorter or longer fixation period? How long should be a duration of your mortgage? By answering these and other questions you will choose the right mortgage for you with your Mortgage specialist.
3) Provide the necessary documents - The bank will need a few documents from your side, which is mainly confirmation of your income, bank account statements, copy of your ID and other forms which will be prepared by the mortgage broker.
4) Sign & withdraw the mortgage - Once your mortgage is approved, you will sign it and meet the withdrawing conditions with the assitance of your Mortgage specialist.
Afterwards, you can enjoy your new property!
Czech National Bank regulates the conditions for providing mortgage loans
April 3, 2017
Starting 1 April the Czech National Bank regulates mortgages with higher LTV ratio. In practise it means that the banks could provide to the new clients mortgages only up to 90% of a purchase price, resp. a pledge value.
Moreover, the best mortgage conditions are for the mortgages up to 80% from 1 April 2017.
Last year it was possible to get 100% mortgage and since 1 October the maximum mortgage was 95% LTV.
On the other side many clients has their own savings and we usually recommend to have a deposit of 15-30% from the purchase price.
If you think about financing of a property in the Czech Republic, feel free to ask us for a preliminary calculation.
Taxes in the Czech Republic related to the real estates
February 1, 2017
We offen receive questions regarding the tax system in the Czech Republic. Find below the general overview of the taxes that might interest you if you would like to own a property here:
Personal Income Tax (15%) - If you will rent an apartment or house you will be taxed by the personal income tax. The tax base could be decreased by costs of 30% from rental income.
Corporate Income Tax (19%) - In case you will have a corporate mortgage you will pay 19% from the tax base (income minus costs).
Real Estate Tax - The owners of lands, apartments and houses pay a real estate tax every year. The tax is calculated from square metres and it depends mainly on a location of the property. This tax is very low, e.g. for 80m2 apartment in Prague you will pay only c. CZK 1,000 per year.
Real Estate Transfer Tax (4%) - This tax has the main impact on a purchase process. You will pay 4% from a purchase price (or from an evaluation price in some cases) within 3 months after buying the property.
Generally the taxation in the Czech Republic is not so big in comparison to other European Union countries.
New Act started on 1 December. What is the impact for foreigners?
December 9, 2016
On 1 December 2016 new Act started which has also impact on mortgages for foreigners. Here is a brief overview:
- It is possible to finance up to 90% LTV (means 90% of a purchase / evaluation price). The most common is to use 85% mortgage.
- The limit for a purchase of a building apartment is 80% LTV (!) This might be a very interesting way of financing for investors, because only 20% as a downpayment is needed.
- For other general rental purposes the limit is set on 60% LTV (if a future rental income is calculated).
- The maximum early repayment fee after 24 months of a mortgage duration is only 1% from the mortgage amount.
- Extraordinary payments of 25% from a mortgage per annum is free of charge, so with no penalties.
- The interest rates are still very competitive below 2% p.a. currently.
Real Estate Transfer Tax - change of the taxpayer
November 3, 2016
Starting 1 November 2016 the new Act related to the Real Estate Transfer Tax became into force. Before this date a seller and a buyer were abble to agree who will pay the tax for the transfer.
Currently the tax payer has to be always the buyer in all cases.
The amount of the tax is at the same level of 4% from a purchase price (or the evaluation price if the purchase price is significantly lower).
Hurry up! The new Act will come into force already on 1 December
October 7, 2016
Many changes on the Czech mortgage market are coming this autumn:
i) The Czech National Bank limited max. LTV (loan-to-value ratio) from 100% to 95%. This restriction is valid from 1 October 2016. Currently the buyers need at least 5% as a downpayment.
ii) Since 1 November 2016 there is a change of real estate transfer tax act and the taxpayer will be always the buyer of a property. The amount of tax will remain on the same level which is 4% from a purchase price.
iii) Starting 1 December 2016 the new Act will come into force and it will change the mortgage market quite a lot. There will be some new limits, e.g. a limit of 60% mortgage for rental purposes. On the other hand new Act includes also new benefits for the clients such as lower penalties of early repayment of a mortgage.
Historically low interest rates!
September 21, 2016
Based on the FINCENTRUM HYPOINDEX (https://www.hypoindex.cz) the average interest rate of mortgage loans decreased to 1.84% p.a. in August 2016 in the Czech Republic. The decreasing trend continues to historically low interest rates!
Here are the comparison of average interest rates during the last three months:
- August 2016: 1.84% p.a.
- July 2016: 1.88% p.a.
- June 2016: 1.87% p.a.
Coming changes of the Czech mortgage market
June 20, 2016
The Czech National Bank ("CNB") wil influence the maximum LTV (Loan to value) of the mortgages. The CNB recommends max 95% LTV from 1 October 2016 and max. 90% LTV from 1 April 2017. The true is, that this is only the recommendation, but the banks which will provide loans above this max. LTV settled by the CNB will need more capital to cover these loans. In other words these mortgages will be still available, but the conditions for clients might not be so friendly as today.
Moreover, new Act of consumer loans was agreed by parlament of the Czech Republic and it also influences the mortgages. The clients will be able to repay the 25% of the mortgage every year without any penalities or repay the whole mortgage in case of difficult life situations. This Act should be valid from October or November this year.
May is the best month of the year to take a mortgage
May 15, 2016
The interest rates of the mortgages are recordly low, because Czech banks have still attractive spring campaigns. This month is the best to take a mortgage for a variety of reasons.
Firstly, as mentioned above the interest rates are recordly low so you can have a great conditions of your mortgage in May.
Secondly, the purchase prices of apartments and houses are still acceptable, but the forecast is that a growing trend is coming. So do not wait for a long time.
Moreover, a new tax act will be effective during the summer or autumn, so the buyer will pay a real estate transfer tax of 4% from a purchase price.
Nowadays, the conditions are very friendly on the Czech market to take a mortgage. Feel free to contact us and you will get a personalised mortgage and conditions.
Spring campaigns keep interest rates very low!
April 11, 2016
Many banks which provide mortgages in the Czech Republic started spring campaigns last week. The campaigns are different, but with the same result for the clients: you will save money now.
At some banks they have special interest rates, some of them have a discount on fees or have some services without any fees.
The conditions for buying a property is still great at the Czech market and if you think about a mortgage feel free to contact us to get an individual interest rates and conditions.
Czech mortgage market in 2016
January 12, 2016
If you were not able to find your dream property during the last year, where the interest rates of mortgages were extremely low in the Czech Republic, you will have another chance for a great conditions in 2016.
The mortgage market has had a record-low interest rates of mortgages in its history in the Czech Republic. The average interest rate of a mortgage was during the whole year around 2% p.a.
Despite of the expectations of economists the interest rates remained low also after the summer time and after autumn as well.
Nevertheless, if you did not find the right property for you last year don´t worry. The very friedly conditions should remain for the whole year 2016! The prediction of economists is that there might be a very slowly increasing trend of mortgage interest rates, but the rates will be still very low.
Once you will find a suitable property for you feel free to ask us for financing and individual conditions.
Interest rates decreased again!
December 10, 2015
Based on the FINCENTRUM HYPOINDEX (https://www.hypoindex.cz) the average interest rate of mortgage loans decreased to 2.09% p.a. in November 2015 in the Czech Republic. The decreasing trend from the beginning of the year still continues.
Here are the comparison of average interest rates during the last three months:
- September 2015: 2.11% p.a.
- October 2015: 2.12% p.a.
- November 2015: 2.09% p.a.
Mortgage market trends in the Czech Republic
September 1, 2015
This summer we can observe a changing trend of the interest rates in the Czech Republic. Two of the Czech Top 3 banks increased its interest rates in June. The third bank from Top 3 will increase the interest rates during the first half of September. Does it mean that we are at the beginning of a new increasing trend?
The predictions of the Czech leading economists are mostly the same and conservative as well. Based on the main prognosis the interest rates should turn its trend and set the rates on a little bit higher level than in the previous months. Generally, it is not expected that the interest rates would arise very fast in the second half of this year. The predictions say that the increasing trend could be very slow. Due to the competition between the banks it could also happen that the interest rates would be constant during this autumn.
If you are looking for the right property, do not worry about the increasing interest rates so much, because the mortgage conditions are going to be still very positive in the following months on the Czech market in a comparison to the previous years.
Of course, that an unexpected economic occurrence might change the situation very fast, so do not wait unnecessarily for too long.
Mortgages are easily available, but think twice
June 11, 2015
The interest rates may unpleasantly increase after the fixation period. Think of it already in the negotiation of mortgages, and consider everything well.
The interest rates are still decreasing and mortgage loans are cheaper than during the previous years in the Czech Republic and in the Central Europe as well. It is particular important to remember that the current agreed interest rate is valid only for a fixed period and not for the entire duration of your mortgage. The fixation period is usually set at 3, 5 or 7 years. After this period, you will have a different interest rate and due to the fact that interest rates are very low nowadays, you can assume that your interest rate may be significantly higher and thus your monthly payment.
Let's show an illustrative example. Suppose you are planning to buy an apartment in June 2015 and take a mortgage in the amount of CZK 2 million. Your interest rate will be 1.89% per annum and your monthly payment would be CZK 7,283 in case of 30 years duration of your mortgage. You choose a 5 year fixation period so this conditions will be valid until June 2020. And what's next?
The monthly payment may raise by thousands of crowns after the fixation period.
The bank will offer you the new conditions to continue and you can decide if you stay at the same bank or you leave and refinance the mortgage to another bank in June 2020. However, the interest rates generally depend on the current economic situation and it may happen that in 5 years you will have the interest rate almost by 3 percentage points higher!
For example, you can negotiate new interest rate of 4.89% per annum in June 2020 and your monthly payment would increase to CZK 10,062. In comparison to your former monthly payment would be your new payment higher after the fixation by CZK 2,779!
The question is: Are you prepared to pay substantially higher payment if the interest rate will increase? Or your budget is set on the maximum and you can get into the trouble with paying the mortgage in case of increasing interest rates?
We advise our clients on the possibility that their monthly payment can be up to several thousand crowns higher than it is today in a time of low interest rates.
How can you prepare?
The preferred option is to create the financial reserves to be able to cover increased monthly payments. If it is not possible, it is advisable to reconsider mortgage financing or choose a cheaper property in this case.
The mortgages are definitely easily available, but think ahead. It is mostly a commitment for 20 or 30 years, not only for the first fixation period (eg 5 years).
Interest rates decreased again! Average rate is 2.11% p.a.
May 21, 2015
Based on the FINCENTRUM HYPOINDEX (https://www.hypoindex.cz) the average interest rate of mortgage loans decreased to 2.11% p.a. in April 2015 in the Czech Republic. The decreasing trend from the beginning of the year continues.
Here are the comparison of average interest rates during this year:
- January 2015: 2.34% p.a.
- February 2015: 2.27% p.a.
- March 2015: 2.16% p.a.
- April 2015: 2.11% p.a.
Average interest rate decreased to 2.16% p.a.
April 22, 2015
Based on the FINCENTRUM HYPOINDEX (https://www.hypoindex.cz) the average interest rate of mortgage loans decreased to 2.16% p.a. in March 2015 in the Czech Republic. This year´s decreasing trend is also obvious as in the last year 2014.
Here are the comparison of average interest rates during this year:
- January 2015: 2.34% p.a.
- February 2015: 2.27% p.a.
- March 2015: 2.16% p.a.