Economists report increased interest in mortgages. Czech household debt is growing.
The debt of the Czech population in the first half of this year increased year-on-year by 10.8 percent to 3.8 trillion crowns. The results are significantly influenced by the increase in housing debt, which rose to 3.16 trillion crowns. The total volume of unpaid debt then increased by 8.3 percent to 33.76 billion crowns.
At the end of the second quarter of this year, the growth in housing debt continued, strengthening by 11 percent year-on-year to CZK 3.16 trillion. This is the highest annual increase since 2022. The aforementioned figures are derived from the data of the Banking and Non-banking Client Information Registry of CRIF - Czech Credit Bureau.
The described trend follows the previous year, when, according to the Association for Real Estate Market Development, the value of provided mortgage loans climbed to more than 250 billion and loans from building savings accounts to just under 50 billion crowns. In terms of volume, therefore, loans for housing finance returned to pre-coronavirus pandemic levels. According to data from the Czech Banking Association, during this period, Czech banks and building societies provided more than 80 percent more new mortgage loans than the previous year.
"The behavior of households shows how they are watching the development of the real estate market. Prices of flats and houses accelerated last year with the limited supply of new projects continuing into 2025,"
commented on the development for LP-Life by the general director of ČSOB Mortgage Bank, Martin Vašek.
Developers and banks are trying to meet the needs of interested parties
Both banks and developers are trying to attract customers with more favorable financing this year as well. According to the current analysis of the Home Portal, 78 percent of the monitored residential projects offer their own mortgage service.
Half of the projects, as the survey claims, attract cheaper interest rates, thanks to which clients can gain more advantageous financing than they would get individually on the market. Another advantage is the ability to put down only 10 percent of the purchase price when signing the future purchase agreement.
The aim of all these steps is usually to simplify the whole process. From choosing an apartment to signing the loan agreement. This also includes incentives in the form of a lower initial investment, waiver of reservation fees, or easier administration.
The director of the Banking register, Lenka Novotná, noted the following for the Czech Press Office:
"The volume of housing debt has exceeded the limit of three trillion crowns this year and has increased by 172 billion crowns in the first half of the year."
The increasing prices of properties and the refinancing of three-year and five-year fixes from the years when interest rates were low are reflected in the volume of housing loans.
The situation is dramatizing especially because with the rise of housing debt, the volume of unpaid debt is also increasing. It is the amount of debt overdue for more than 90 days or so-called non-performing loans. At the end of last year, it began to increase for the first time since 2015 and at the end of the second quarter it reached 4.72 billion crowns, which means a year-on-year increase of six percent.
Compared to the situation at the end of June last year, the number of those who are unable to repay has increased by almost 8 thousand more. Over two-fifths of housing loans are being repaid by people aged 35 to 44. Their payment morale is deteriorating the most.
Consumer loans only make up a fraction of total debt
It should also be noted that housing is not the only source of loans. Another area that represents a large source of debt is short-term consumer loans, the volume of which increased by 9.6 percent year-on-year to 645 billion crowns.
And even though they are rather "petty" compared to the volume of mortgages, their volume might become more pronounced in the second half of the year. The reason is summer, when people more often reach for these loans. Whether it's extraordinary expenses for a vacation by the sea, summer camps for children, sports equipment, repairs at the cottage or perhaps new garden furniture.
Banks and non-bank institutions are meeting this interest and offer various benefits in the form of lower interest rates, the possibility of postponing repayment for a few months or bonuses for timely and regular repayment.
People's optimism, which manifests itself in growing interest in real estate or selected products and services, results in them borrowing more and more money for their intentions. However, some of them come across the fact that they are not able to repay these loans over time. Therefore, everyone should approach loans with consideration and a cool head.
Sources: author's article, own questioning, ARTN, Banking and Non-banking register of client information of CRIF - Czech Credit Bureau, ČTK
