The Czech real estate market has been doing well in March as a result of declining mortgage interest rates and an increase in home purchases there. However, the mortgage rate is still very high if we compare it with previous years. 

Czech banks and building societies issued mortgages worth 12.6 billion crowns (about $568 million) in March, which is 60% more than a month earlier (+4.7 billion crowns). While there were 2,289 new mortgages in February, the number rose to nearly 3,500 in March. It means that the volume and number of mortgage loans have reached a peak, which was last seen in the middle of last year.

As noted by Jakub Seidler, chief economist at the Czech Banking Association, many people have realized that high-interest rates will remain at the same level in the near future, so they do not expect a significant decline. Also, in his opinion, a decline in real estate prices in March, which in some regions was more than 20% compared to the middle of last year, led to a revival in the market.

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In March, the interest rate on new mortgage loans without refinancing fell to 5.86%, the same level as in October last year. Nevertheless, it continues to be at its highest level in twenty years. Actual interest rates are in the 6 to 7 percent range.

For a mid-size mortgage, a 1 percentage point increase in the interest rate in the Czech Republic results in a roughly 1,500 crown increase in the monthly payment.

Compared to previous years, when a 2% interest rate was prevalent in the market, a mortgage rate level of 6% results in a monthly payment increase of 6,000 crowns ($280) on average.

“Obviously, people have stopped waiting for a miracle and realize that a massive cheapening just won't happen. My personal prediction is about 5 percent by the end of the year,” says Jiri Hluči, founder of the online financial advisory platform Frenkee. He notes that at first, it won't have any effect on real estate prices in cities. But thanks to lower rates and more interest in financing, they could start to rise.