The interest of Czechs in mortgages was again record-high last year

PRAGUE - Interest among Czechs in mortgages was again record-breaking last year, banks contacted by ČTK report. People from the strong birth cohorts of the 1970s are seeking their own housing and are now less afraid of borrowing. Their determination to take on debt for decades is reinforced by good conditions in the economy and fear of rising property prices. This year, banks expect even faster growth, despite a slight rise in interest rates.
At Česká spořitelna, clients took out mortgages amounting to nearly 25 billion crowns last year, which is an increase of 30 percent year-on-year. The average mortgage reached 1.4 million crowns and increases by roughly 100,000 CZK each year, the bank stated in a press release.
Record-breaking figures are also confirmed by medium and smaller banks. At HVB Bank, people took out mortgages worth 4.1 billion crowns last year, which is 0.7 billion more than the previous year. Clients of the bank most commonly take loans ranging from two to four million crowns. Raiffeisenbank more than doubled its mortgage volume to 4.1 billion CZK as well. One-fifth were so-called American mortgages, which can also be used to purchase goods other than apartments or houses.
"Last year we sold mortgages worth nearly three billion crowns, which is the best result in the bank's history," said Živnobank spokesperson Ivo Polišenský. The year-on-year increase in both volume and number of loans exceeded 100 percent, according to him. For this year, he expects even faster growth in mortgages, despite a slight rise in interest rates.
Modrá pyramida, which previously did not offer mortgages, last year introduced a combination of a home savings loan and a mortgage. From March to the end of the year, people borrowed 4.6 billion CZK, with the average loan amount being 700,000 CZK, stated bank spokesperson Hana Vaněčková.
Czechs are also showing increasing interest in American mortgages. By securing property, people can borrow money, for example, for a car. Last year, Česká spořitelna provided 5,000 of these mortgages with an average amount of over half a million CZK.
For this year, banks are even more optimistic and are particularly counting on the forthcoming increase in VAT on housing. They also promise to further accelerate and simplify the loan provision process, as well as expand their offerings.
Česká spořitelna expects an increase in mortgages by 30 to 35 percent. "After last year's great interest in mortgage lending, this year's mortgage market will primarily be influenced by the approaching increase in VAT on residential construction work. There may also be some impact from the anticipated increase in interest rates and elections," said Kamil Kosman, director of the real estate financing and mortgage department.
Other banks and economists speak similarly, explaining that the mortgage boom has several causes. Families from the strong birth cohorts of the 1970s are now purchasing their own homes, interest rates remain low, the economy is doing well, and salaries are growing steadily, so people have confidence in the future, and more families can afford loans, said Jaromír Jáč from PPF.
Moreover, the exemption on the lower VAT rate for housing will end in 2008, which would increase the cost of new apartments. "People are thus motivated to not hesitate and to acquire housing as soon as possible," said Jáč. Real estate companies are also now trying to complete as many projects as possible.