More set to follow as two Czech banks raise mortgage rates

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ČSOB has announced that it will raise interest rates for three-, five- and seven-year mortgages by 0.3 percentage points from next Monday. The new interest rate on the most frequently used mortgage, with a five-year fixed rate, will be 2.99%.

For its part, Česká spořitelna will increase interest rates on mortgages by an average of 0.4 percentage points from Thursday. The interest rate for the five- and eight-year fixed rates will therefore start at 3.14% per annum.

The Czech News Agency reported that other banks in the Czech market also plan to charge more for mortgages.

Moneta Money Bank announced that it would do so later this week. Meanwhile, Raiffeisenbank is considering raising rates and Komerční banka and UniCredit Bank have not ruled out such a move.




Photo: Filip Jandourek, <a class=Czech Radio” title=”Photo: Filip Jandourek, Czech Radio”/>

The board of the Czech National Bank raised the key rate by 0.75 percentage points to 1.5% last week.

The main reason for this increase is the rapid rise in inflation, which exceeded 4% in August.

ČSOB board member Jan Sadil told Czech News Agency that two years of record high mortgage rates were behind us. It is now necessary to adjust their level according to market developments, he said.

However, Mr Sadil said his bank did not expect rising mortgage rates to deter people from taking out home loans to any great extent.

Filip Belantz from Česká spořitelna said his bank expects interest rates to continue to rise. He said the prime rate, by which mortgage rates are set, could reach 2% this year and as high as 2.5% next year.

Mr. Belantz said that for this reason, Česká spořitelna recommends customers to choose long-term fixed rates; these offer the security of a stable repayment amount and unchanged rates, in principle for the entire repayment term of the mortgage, he said.

The average mortgage rate fell from 2.23% in July to 2.32% in August, according to data from Fincentrum Hypoindex.

Experts say Thursday’s step by the CNB could lead to a faster acceleration in mortgage interest rate growth.

Veronika Hegrová of Hyponamir.cz told the Czech News Agency that previous advice to get a mortgage as soon as possible was doubly true now.

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