Interest rates have been falling for the seventh month, but interest in mortgage negotiation has not recovered. This is mainly due to the regulation of the National Bank and high property prices. In order to attract new clients, banks offer a range of events and discounts, which are aimed especially at young people.
In the first half of this year
Mortgages began to get cheaper because there is simply no interest in them. By July, according to Fincentrum Hypoindex statistics, 43,489 loans for housing totaling USD 99 billion were contracted, a significant decrease compared to previous years. For example, from January to July 2016, 62,881 mortgage loans for USD 122 billion were concluded.
In January, the average interest rate was almost 3%, falling to 2.86% in the next six months and reaching 2.61% in July. According to experts, further decline is expected, up to 2%. Whether this will increase interest in mortgages remains a question.
Last year, the mortgage market was shaken by the National Bank’s regulation and the rise in property prices, which is why most people postpone negotiating a loan. Despite a gradual decrease in interest rates, only 6,153 clients chose a mortgage in August, which is 462 people less than in July. At the same time, the total volume of mortgages negotiated in August was more than a billion crowns lower than in July.
Own housing is unavailable, especially for young people
Owing to rising property prices and new conditions for obtaining a mortgage, housing is becoming less and less accessible. Since October 2018, banks have been monitoring the ratio of total debt to annual income and the ratio of total installments to net income. These are the aforementioned regulations of the National Bank, due to which the mortgage reaches a smaller number of people. This applies in particular to persons of the so-called generation Y, who currently reach the age of 25 to 35 years.
Thanks to the amendment to the Act on the CNB, more young people could afford their own housing.
The good news is that mortgages for people under 36 could be more affordable, thanks to a draft amendment to the CNB Act, which was submitted by the Ministry of Finance in May 2019. Specifically, there should be milder conditions regarding the amount of mortgage and total debt.
Some banks also try to attract young potential clients through more favorable conditions. For example, it reduced its interest rate on both current and US mortgages by up to 0.25% as part of its new campaign “We are launching the avalanche of moving”. This benefit is intended for those who borrow for their first housing.
Other banks, such as Good Credit or Good Finance Bank, also cheaper mortgage loans. Good Lender then launched a new service in July, thanks to which it is possible to reduce the monthly payment by up to 30% in case of extraordinary life situations. In addition, the service can be used repeatedly throughout the installment period.