What’s New in the Mortgage World

What Was It Like a Year Ago
A year ago, 114,500 mortgages were concluded by citizens of the Czech Republic, amounting to 225.8 billion Czech kronor. This was mainly due to the implementation of the new consumer credit law and the Czech National Bank\’s announcement that it would reduce the LTV (loan-to-value (LTV) index for mortgages from 100% to 95% of the property value). This step by the Czech National Bank was easily followed by other financial institutions. Some banks even lowered their LTVs to 85%
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Negative impact on applicants [16
For citizens, this restriction is negative, as it makes mortgages less accessible and applicants must find a way to finance the difference between the loan amount and the property value (mortgaging another property is one option).
Another negative factor was a 0.5 percentage point increase in interest rates. Banks justify this by the higher costs associated with the new law (related to consumer credit) and higher international interest rates. For long-term repayments (mortgages of up to 30 years), the difference amounts to up to SEK 80,000. Banks calculate that with these changes, they may even cancel their savings and return to drawing loans from their savings.
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Outlook for 2018 [22
Mortgage lending volume is expected to decline slightly from last year and will likely not exceed the 200 billion mark. Mortgage rates are expected to be around 2.2% (1.77% in 2016) and could rise to 2.8% in the next year, but will not exceed the 3% threshold. Unfortunately, property prices in the Czech Republic have risen sharply by 11.4pc compared to abroad, and are not expected to rise any further this year.