New buildings in one of Prague's districts
As Vinegret.cz reports, residents' interest in mortgages has consequently grown significantly – in September, 9,825 borrowers took out mortgages, 535 more than in August. The total volume of loans issued over this period increased by CZK 1.47 billion to CZK 19.6 billion. The average size of a single mortgage was CZK 1.95 million.
September was the last month when banks could issue 100% mortgages to clients. Since October 1, 2016, this has been prohibited by a directive from the Czech National Bank. So far, the new rules have had virtually no impact on the market. Experts expect this to change in December, with the entry into force of the updated Consumer Credit Act.
"Despite the impressive statistics, fears of a mortgage bubble are unfounded today. For several years now, the solvency of Czech families has been growing, mortgage rates have been declining, and the unemployment rate is trending toward a minimum. It is logical that Czech clients want to invest in their own housing. This is not an anomaly but natural market growth," said Jiří Paták, director of the financial company Chytrý Honza.
Experts also note that cheap mortgages have led to unprecedented demand for housing in the country. "A record number of new buildings are being sold today. In the first quarter of this year alone, 1,600 apartments were sold in Prague. Developers cannot keep up with bringing new offers to the market, causing demand to begin to exceed supply and prices per square meter to rise rapidly," said Dušan Kunovský, head of the development company Central Group.
Note that the Hypoindex reflects changes in the average mortgage rate in the Czech Republic without regard to the fixation period. Fincentrum has been tracking this indicator since 2003. During this time, the highest average mortgage rate was recorded in August 2008, at 5.82%. The lowest (before the current update) was in April 2016, at 1.94%.