Banks had to deal with a collapse in mortgage interest last year, when the market fell 15%. But financial institutions are now signaling that the worst is over and they expect to recover from the bottom this year. At the same time, some new rules affecting mortgages and housing savings have come into force or will come into force this year. Among other things, you can count on a higher penalty in the event of early repayment of a loan, the State has also limited the contribution to building savings. So if someone is thinking about a mortgage or building savings, Deník brings questions and answers that might help them make a decision.
Are you thinking about taking out a mortgage? The journal contains questions and answers that may help you make a decision. You can find more in the article | Photo: Deník/Petr Zbranek
Will mortgages become cheaper or more expensive?
At the end of last year the interest rate was 5.67%. According to estimates by Miroslava Zetek, vice-president of the board of directors of Hypoteční banka ČSOB, this year it should fall below 5%, and in 2025 even below 4%. So mortgages should become cheaper.
Source: DiaryHave mortgage requirements eased?
The Czech National Bank has decided that from the beginning of this year the DTI indicator for mortgages will no longer be monitored, and from last year the DSTI indicator will also no longer be monitored. While the DSTI shows the ratio between the total amount of debt repayments and the applicant’s monthly net income, the DTI evaluates the loan applicant’s total debt in multiples of his or her annual net income. Applicants under the age of 36 could thus borrow up to 9.5 times their annual net income. The others could then take on 8.5 times more debt. As these indicators are no longer monitored, mortgages are expected to become more affordable. However, the Central Bank believes that due to high real estate prices overvalued and high inflation a mortgage will remain difficult to access for some people.
Since the beginning of this year, some people have a new obligation to pay taxes on land or buildings for which they have not yet paid anything or have paid a different rate:
Real estate tax in 2024: who has to pay again, who is entitled to forgiveness
Will early repayment of the mortgage be penalized?
Banks will be able to charge a penalty for early repayment of the mortgage during the fixing. They explain it by saying this early reimbursement they incur additional costs, which they then leave to customers to pay. Instead of the previous hundreds of crowns, such a step can cost several tens of thousands. Banks may charge up to a percentage of the prepaid portion of the total principal. How much such a customer will pay, for example, the portal Srovnejto.cz provided.
For example, a client takes out a mortgage of four million crowns for ten years with an interest rate of 5%. At the time when he had already repaid 500 thousand crowns, he received a better offer from another bank for a loan of three and a half million crowns with an interest rate of 3%. When he then transfers his debt to a cheaper creditor, he pays the first bank a fine of 35,000 crowns and another thousand crowns as compensation for administrative costs.
Can someone be exempt from the fine?
Among the reasons when possible mutual repay early without penalty, for example, the death of one of the partners or spouses who had a joint mortgage, thus jeopardizing the ability to repay the loan. Another reason will be that there will be an insurance claim arising from the ability to pay the insurance. Furthermore, each year it will be possible to repay 25 percent of the loan without penalties.
The sale of the property on which the mortgage is encumbered will also be free of penalties. But it must be after two years or more after its purchase. Expenses will also be avoided if the mortgage is paid off early as part of the liquidation of the joint assets of the spouses, if the property financed by the mortgage is included. It will also be possible to pay in advance at the end of the fixation or three months after the fixation of the fixation without charges.
When will the new rules come into force?
The new rules will apply to new credit agreements that will be negotiated after 1 September 2024. “For existing ones, they will only apply to early repayments that occur during the negotiated fixation after the date of entry into force of this part of the amendment , that is, after September 1, 2024,” the spokesperson added the Ministry of Finance Filip Běhal.
Property owners will pay extra starting this year. The government’s consolidation package makes over forty changes related to property tax:
Property tax from 2024: owners will pay extra. It will increase by 80%.
How many loans did the banks grant last year and for how much?
Last year, banks granted real estate loans totaling 172 billion crowns, of which 128 billion went to mortgages and 34 billion to loans building savings. The average mortgage amount was three million crowns.
How will real estate prices develop this year?
Real estate company RE/MAX estimates that house and apartment prices could stagnate or even increase slightly in the first half of this year. However, this especially applies to new or low energy consumption properties. The prices of older properties outside the centres, properties with legal defects or properties before renovation will continue to tend to fall.
What are mortgage rates abroad?
In October last year the Financial Times server published a comparison of mortgage prices in some European countries. It follows that, for example, the interest rate in Germany was 1.88%, in France 1.55% and in Spain 3.44%. At that time in the Czech Republic the percentage was 6.05%.
What volume of mortgages should banks provide this year?
Martin Vašek, chairman of the board of directors of Hypoteční banka and ČSOB stavební spořitelna, estimates that this year the banks could grant mortgages worth 180 billion crowns and build savings loans worth another 40 billion crowns.
Many people leave money on the street. This is, for example, a housing allowance, which can amount to several thousand crowns:
Housing allowance 2024: how to request it, who is entitled to it, what is the amount
How many new apartments are being built?
According to the latest data from the Czech Statistical Office, 3,570 apartments were completed in the Czech Republic in October last year, which is 7.2% more than the previous year. On the same day, building authorities issued 6,645 building permits, or 7.4% fewer. Astrotherm CZ CEO Martin Trešl forecasts the first quarter of this year little construction activity. He expects an increase in housing construction only in 2025.
Is mortgage interest still tax deductible?
The interest deduction from the loan can be deducted from the tax base in cases where the loan was used for the purchase of housing or its reconstruction. Loan interest may also be required for a construction savings loan or refinancing.
Does building savings still work in the Czech Republic?
Banks and building societies continue to provide building savings.
What is the interest in building savings?
Last year, a total of 490,000 new contracts were signed, which is 14% less than the previous year. According to Ladislav Neuhäuser, vice-president of the board of directors of ČSOB Stavební spořitelna, several factors contributed to this decline. He appears to have discouraged the interested party from concluding the contract a proposal to abolish state aid. Interest on savings accounts also increased last year and the reduction in the population’s purchasing power had a significant impact on the result.
How has the state allowance for building savings changed?
Within consolidation package the government has reduced the state contribution to building savings from two thousand to one thousand crowns, starting from January 1st this year. In April, savers will therefore be credited with a contribution for the year 2023, and in April 2025 a smaller contribution for this year. The state contribution is calculated as 5% of the amount that the saver saves in a year. Therefore, a person will get the most advantageous assessment of construction savings if he himself saves 20 thousand crowns in a year.
What are the limits to building savings?
To take advantage of the state allowance you must meet the conditions of building savings and leave all the funds sent in the account for a period of six years. During this binding period the saver will be able to terminate the contract and withdraw the money early, but will lose the right to the state allowance, which will then be returned to the state coffers.
Prepaid mortgages will become more expensive for people:
Mortgage prepayment? Next year the price will increase by tens of thousands of crowns
What is the difference between a mortgage and a building savings interest?
With a mortgage it is always necessary to guarantee the property, while with a building savings loan you can obtain hundreds of thousands of crowns without real estate guarantees. However, for higher amounts, approximately over 700 thousand crowns, it is usually necessary to secure the property for a building savings loan as well. In the case of a regular building savings loan it is also possible to repay it at any time as an exception, whereas in the case of a mortgage the owner would be exposed to a fee.
It is usually possible to obtain even a smaller amount from construction savings, while banks grant mortgages up to a certain amount. A loan via a building savings account is therefore suitable for example for renovation, purchase of a kitchen etc. Furthermore, the construction savings has a guaranteed interest rate valid for the entire repayment period. In the case of a mortgage, however, the interest rate is fixed for a certain period, after which the bank offers a new rate.
Are investments in ecological improvements favored?
The Association of Czech Building Savings Banks and the Czech Banking Association have agreed with the Ministry of the Environment on a 3.5% loan from the program Fix Grandma’s House. These days banks and savings banks are already providing advice, and the support will begin to be provided from February. It will also be possible to manage everything relating to subsidies for energy-saving buildings with construction companies. Savings banks should therefore contribute to the energy transformation of Czech households. According to ČSOB Stavební spořitelna, last year 27% of unsecured loans from construction savings went to affordable housing. Last year, one in four mortgages was used.
2024-01-20 10:00:34
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