How to negotiate a favorable mortgage rate? An experienced consultant will advise.
Unless something dramatic happens, the domestic mortgage market this year will experience the second most successful year in history. Interest in home loans has been growing unprecedentedly recently. Experts also warn that you should not delay choosing a property. Are you interested in how to get a beneficial mortgage and what you should watch out for?
The mortgage market is strengthening. This is happening along with the revitalization of the residential market, which is influenced by the stabilization of inflation and also by the gradual decrease in interest rates. In the past period, there has also been a relaxation of rules for assessing income and indebtedness of applicants, bringing mortgage financing closer to a broader group of people. As a result, banks provided housing loans totaling over 250 billion crowns in 2024. And that is certainly not a little. Year-on-year, this meant an increase of an impressive 78 percent!
The market is set for further growth
But the splendid mortgage ride certainly doesn't end there. Mortgages are also thriving this year. In June alone, banks and building societies provided housing loans worth 37.5 billion crowns, representing a nine percent increase compared to May.
Interest rates, meanwhile, continue to decline slightly. At the beginning of the summer, they dropped on average from 4.6 percent to 4.56 percent, as indicated by the statistics of the Czech Banking Association Hypomonitor. The credibility of the stated indicator is evidenced by the fact that all banks and savings banks providing mortgages on the Czech market contribute data for its calculation.
The total volume of mortgages has so far this year reached just under two billion crowns. Compared to January to June of the previous year, this represents more than 55 percent.
"Mortgage rates continue their return to long-term normality, which is reflected in stable demand for mortgages,"
Petra Skrbková, the director of the Housing team at Česká spořitelna, told the Czech News Agency.
The hunger for housing loans could increase their total volume to almost 300 billion crowns this year, as predicted by the Association for Real Estate Market Development.
"Mortgages are driven up mainly by the dynamic growth of property prices and the expectation that interest rates won't decrease much in the foreseeable future,"
noted Ondřej Šuchman, the mortgage manager of Komercni Banka.
How to get a beneficial mortgage
Those considering acquiring property on a mortgage are advised not to hesitate too much with their decision.
"Property prices are rising faster than interest rates are falling. In the first half of the year, the average prices of new apartments in Prague increased by almost 9 percent, and today it is common to sell 6 square meters for a million crowns. If people are waiting for lower rates, they risk that price growth will deprive them of much larger amounts than they would save. Nowadays, it is advantageous to arrange a mortgage with a short fix - rates can be refinanced in the future, but you can't retrospectively reduce a higher purchase price. We see it every day that customers who waited a year and a half to two for lower rates are unpleasantly surprised. Due to the higher price of property, their installment has almost not changed,"
Barbora Rolcová, co-founder of the consulting company Finotéka.cz, explained to the editorial office.
Are you wondering how to get a profitable mortgage? The upper limit of the LTV loan indicator is at 80 percent. For applicants under 36 years, it is then at 90 percent. LTV expresses the ratio between the loan amount and the collateral value of the property. In the case that the property is sold for 5 million crowns, this means that a 40-year-old applicant only needs to acquire a million crowns. The remaining funds are obtained thanks to the loan.
Consultant assistance
The consultant who will be dealing with your mortgage will usually need a property price estimate, a purchase agreement or budget, income verification, and an identity document. Thanks to this, he will be able to prepare a contract proposal and other documents. This is followed by the signing of the credit and lien agreements, verification of the signatures of the property owners, and entry into the property register. All this takes about three weeks. The consultant will also let you know in advance, according to what key, you will draw money for the property purchase.
Remember that before you draw the entire mortgage, you only pay the interest. Only then do you start paying off the loan with regular monthly payments. And at least three months before the end of the mortgage fixation, you should find out under what conditions you will repay the loan in the next period. The advantage of fixing is that you do not have to deal with any turbulence in the financial market during this time.
A consultant will advise you on everything, who knows the current situation on the market and can guide you through the maze of steps always associated with acquiring a mortgage and its management. They can, for example, explain to you that when choosing a mortgage, it pays to not just follow the interest rate, but also other indicators. Expenditure on a loan can be increased by other associated costs - for example, various kinds of insurance. Banks are already abandoning charges for maintaining a mortgage account, but some fees are still charged to their customers. This could be, for example, a fee for an extraordinary payment outside the fixation period. For many banks, this fee can be up to tens of percent of the amount of the extraordinary payment. Also, know that some banks insist in contracts on their consent to any rental of collateral property. Therefore, it is better to report this fact to the financial institution in advance.
It's definitely worth contacting consultants who are professionals in their field and can provide you with the most advantageous conditions. They will advise you on how to quickly get to the desired properties before their price goes up. Let's go, there's not much time left!
Sources: author's article, ČTK
