CBA Hypomonitor: Banks granted mortgages worth CZK 150 billion last year
Mortgage market continues to revive, interest rate fell to 5.65% in December
Prague, 15 January 2024 - In the whole year 2023, banks and building societies granted mortgage loans in the volume of CZK 150 billion, of which net new loans without refinancing amounted to CZK 124 billion. Year-on-year, this is a quarter decline, but this is due to the effect of the higher comparative base in the first half of 2022, when mortgage volumes remained high. In December last year, mortgage loans in excess of CZK 15 billion were granted. Month-on-month, the volume of mortgages originated fell by 7%, but December is traditionally a weaker month in terms of mortgage market activity, and if we take this seasonality into account, the mortgage market was mostly flat in December, maintaining the stronger activity of the last three months. Thus, the mortgage market continues to recover slightly, which is related to the easing of rules by the CNB, a slight decline in rates and deferred demand. Interest rates continued to decline in December, falling from 5.67% to 5.65%, the lowest level since mid-2022. The information is based on data from the CBA Hypomonitor, which captures data from all domestic banks and building societies providing mortgage loans.
According to the CBA Hypomonitor, banks and building societies provided mortgages to households in the amount of CZK 15.1 billion in December this year. However, December is traditionally a weaker month in terms of activity on the mortgage market and, after seasonal adjustment, the volume of mortgages granted would have been generally stagnant month-on-month. The mortgage market thus maintained the more favourable activity of the previous three months in December. On a year-on-year basis, the impact of a lower comparative base is evident, with the data comparing to a very weak second half of 2022. As a result, mortgage volumes rose by 93% year-on-year in December. However, despite visually very strong year-on-year increases, mortgage volumes remain more than 50% lower than in December 2020.
According to the CBA Hypomonitor, banks and building societies provided mortgages to households in the amount of CZK 15.1 billion in December this year. However, December is traditionally a weaker month in terms of activity on the mortgage market and, after seasonal adjustment, the volume of mortgages granted would have been generally stagnant month-on-month. The mortgage market thus maintained the more favourable activity of the previous three months in December. On a year-on-year basis, the impact of a lower comparative base is evident, with the data comparing to a very weak second half of 2022. As a result, mortgage volumes rose by 93% year-on-year in December. However, despite visually very strong year-on-year increases, mortgage volumes remain more than 50% lower than in December 2020.
"The year 2024 will be about falling interest rates and market recovery. This downward trend in rates has already started at the end of 2023, driven by the gradual decline in the cost of resources and of course the market environment. We expect to see a recovery in mortgage refinancing, especially for clients with interest rates around 6% who can still take advantage of free extra repayments. The decline in mortgage rates is also likely to have a positive effect on the real estate market, where limited supply and increased demand may affect property prices," said Marek Richter, Head of Mortgage Services at Air Bank.
The volume of actual new mortgages granted without refinancing reached CZK 12.7 billion in December 2023 after CZK 13.4 billion in November. The volume of refinanced loans (internally or from another institution) amounted to CZK 2.4 billion compared to CZK 2.8 billion a month earlier. The number of newly granted mortgages reached 3,770 in December, representing a 10% month-on-month decline. In year-on-year terms, this is a 65% increase. The average monthly number of mortgages granted in the last quarter of last year was around 4,000 per month, almost double the same period in 2022, but on the other hand half of the end of 2020;
"In December, the Czech National Bank made a long-awaited cut in its key interest rate. We can expect the CNB to continue cutting rates this year, and mortgage rates will also head down over the course of the year as market rates for longer maturities fall, which will translate into increased demand for housing loans," said Petr Gapko, chief economist at Moneta Money Bank.
Table 1: Summary of mortgage origination volumes and average interest rates for December 2023
| Objem | Počet | Sazba |
| |||
Celkem | 15,1 | 4657 | 5,64 |
Nové úvěry | 12,7 | 3770 | 5,65 |
z toho: | | | |
na koupi | 10,4 | 2972 | 5,62 |
na výstavbu | 1,6 | 503 | 5,60 |
ostatní | 0,7 | 295 | 6,10 |
Refinancované z jiné instituce | 2,0 | 723 | 5,60 |
Refinancované interně | 0,4 | 164 | 5,63 |
Pramen: ČBA Hypomonitor | | |
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Mortgage market activity fell by a quarter in the whole year 2023
In the whole year 2023, banks and building societies granted mortgage loans in the volume of CZK 150 billion, of which net new loans without refinancing amounted to CZK 124 billion. This was a year-on-year decline of 24%. This is mainly due to the fact that the first half of 2022 was still strong in terms of mortgage originations and the higher comparative base from this period is thus affecting the year-on-year comparison. As a result, there were 50% fewer mortgages originated year-on-year in the first half of 2023 and over 50% more in the second half of 2023. Compared to the pre-pandemic years 2017-2019, the volume of mortgages granted in 2023 was roughly one-third lower;
In the whole year 2023, banks and building societies granted mortgage loans in the volume of CZK 150 billion, of which net new loans without refinancing amounted to CZK 124 billion. This was a year-on-year decline of 24%. This is mainly due to the fact that the first half of 2022 was still strong in terms of mortgage originations and the higher comparative base from this period is thus affecting the year-on-year comparison. As a result, there were 50% fewer mortgages originated year-on-year in the first half of 2023 and over 50% more in the second half of 2023. Compared to the pre-pandemic years 2017-2019, the volume of mortgages granted in 2023 was roughly one-third lower;
Chart 1: Annual volume and number of mortgages granted between 2021 and 2023
"In terms of the original expectations at the beginning of 2023, the reality was relatively favourable and the volume of mortgages granted ended up at the upper limit of the estimates. This was probably due to a combination of factors, ranging from the relaxation of income rules by the CNB, to a slight decline in house prices or a slight fall in rates. This year, the mortgage market should continue to recover and we can expect double-digit growth for the full year, but it will probably still not reach the levels of the pre-pandemic years," says Jakub Seidler, chief economist at the Czech Banking Association.
The average mortgage rate fell slightly further in December
The interest rate on actual new mortgage loans fell slightly further from 5.67% in November to 5.65%, remaining the lowest since July 2022. Interest rates have thus been falling over the past six months, made possible by a gradual decline in market interest rates. However, despite this development, mortgage rates have remained above average over the last two decades and were at similar levels to the current levels in 2008 and 2009. Realised interest rates, as opposed to bid prices, reflect the actual real interest rate on signed mortgage contracts. Offering rates are also cosmetically decreasing, falling below the 6% threshold where they have been since mid-2022.
The interest rate on actual new mortgage loans fell slightly further from 5.67% in November to 5.65%, remaining the lowest since July 2022. Interest rates have thus been falling over the past six months, made possible by a gradual decline in market interest rates. However, despite this development, mortgage rates have remained above average over the last two decades and were at similar levels to the current levels in 2008 and 2009. Realised interest rates, as opposed to bid prices, reflect the actual real interest rate on signed mortgage contracts. Offering rates are also cosmetically decreasing, falling below the 6% threshold where they have been since mid-2022.
Chart 2: Average mortgage rate - new business
Mortgage rates reacted with a slight lag mainly to the evolution of market interest rates for longer maturities. They are influenced by a number of factors - not only the expected development of CNB base rates, but also the inflation outlook, economic developments and the dynamics of similar interest rates abroad. The aforementioned market interest rates for longer maturities [1] have been very volatile this year, with several periods of rising and falling interest rates. This has been confirmed by developments over the past month, when market rates have fallen more sharply in the face of stronger rate cut expectations from major central banks. This, in conjunction with the CNB's expected rate cut, is also translating into domestic rates for longer maturities, which averaged their lowest level since late 2021 in December.
[1] These These are mainly long-dated interest rate swaps (IRS), which reflect the price of money at longer maturities, such as 5 to 10 years.
[1] These These are mainly long-dated interest rate swaps (IRS), which reflect the price of money at longer maturities, such as 5 to 10 years.
Average mortgage size increased in December
The average mortgage size increased from CZK 3.21 to CZK 3.37 million in December. The highest average mortgage size was reached in November 2021, at CZK 3.46 million. It gradually decreased thereafter and reached its lowest level in January 2023 at CZK 2.83 million. The scenarios of the evolution of the monthly payment for different mortgage maturities are shown in Table 2. It shows that a rise in mortgage rates by one percentage point means an increase in the monthly instalment of approximately CZK 1,500 for an average mortgage size. Compared to the 2% interest rate that was common on the market in earlier years, the current mortgage rate means an increase in the monthly payment for an average mortgage of approximately CZK 6,000.The payment for a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 6,000.
The average mortgage size increased from CZK 3.21 to CZK 3.37 million in December. The highest average mortgage size was reached in November 2021, at CZK 3.46 million. It gradually decreased thereafter and reached its lowest level in January 2023 at CZK 2.83 million. The scenarios of the evolution of the monthly payment for different mortgage maturities are shown in Table 2. It shows that a rise in mortgage rates by one percentage point means an increase in the monthly instalment of approximately CZK 1,500 for an average mortgage size. Compared to the 2% interest rate that was common on the market in earlier years, the current mortgage rate means an increase in the monthly payment for an average mortgage of approximately CZK 6,000.The payment for a mortgage of CZK 1 million with a 30-year maturity at current interest rates is around CZK 6,000.
Table 2: Average monthly mortgage payment by length of repayment and interest rate
Průměrná velikost nové hypotéky v Kč: | | | 3 368 225 | ||||
Průměrná úroková sazba v %: | | 2,0 | 3,0 | 4,0 | 5,00 | 5,65 | 7,0 |
| | | | Měsíční splátka: | |||
Splatnost hypotéky v letech: | 15 | 21 675 | 23 260 | 24 914 | 26 636 | 27 782 | 30 275 |
20 | 17 039 | 18 680 | 20 411 | 22 229 | 23 448 | 26 114 | |
25 | 14 276 | 15 973 | 17 779 | 19 690 | 20 978 | 23 806 | |
| 30 | 12 450 | 14 201 | 16 080 | 18 081 | 19 433 | 22 409 |
Pramen: ČBA | |||||||
Pozn.: barevný sloupec odpovídá úrokové sazbě posledního ČBA Hypomonitoru, ostatní sazby jsou ilustrační | |||||||
CBA publishes new aggregate statistics for the entire banking market
The Czech Banking Association publishes new aggregate statistics from the housing market in cooperation with its member banks. These are mainly the volumes and numbers of newly granted and refinanced mortgages and the respective interest rate. These statistics are published by the CBA in aggregate form for the entire banking sector on a regular basis around mid-month. All domestic banks and building societies providing mortgages in the Czech Republic participate in the survey. The data are available from January 2020 in the attached file on the website www.cbaonline.cz, where the relevant statistics can also be found separately for banks and building societies. The above figures are for the sector as a whole, which can also be viewed in a simple graphical form on the cbamonitor.cz
Methodology of the CBA Hypomonitor
The CBA Hypomonitor divides mortgage loans granted by banks and building societies to households into several categories in order to distinguish new loans from refinanced or internal refixations. New loans are then reported in categories according to the purpose of the loan:
1. New loans
These are loans whose full volume enters the economy for the first time. This category does not include loan consolidations or loan refinancing. It is divided into three categories:
2. Refinanced loans from another financial institution
The following banks and building societies provide data for the CBA Hypomonitor: Air Bank, Banka Creditas, Česká spořitelna, ČSOB, ČSOB Stavební spořitelna, Fio banka, Hypoteční banka, Komerční banka, mBank, Modrá pyramida, MONETA Money Bank, MONETA Stavební spořitelna, Oberbank, Raiffeisen stavební spořitelna, Raiffeisenbank, Stavební spořitelna České spořitelna, UniCredit Bank.
The CBA Hypomonitor divides mortgage loans granted by banks and building societies to households into several categories in order to distinguish new loans from refinanced or internal refixations. New loans are then reported in categories according to the purpose of the loan:
1. New loans
These are loans whose full volume enters the economy for the first time. This category does not include loan consolidations or loan refinancing. It is divided into three categories:
- Purchase of property
- Construction of property - including renovation of property
- Other new arrangements - only new loans that are not related to the purchase or construction of property, e.g. US mortgages, settlement of cohabitation, repayment of purchase price, settlement of inheritance share, settlement of cooperative share, etc.
2. Refinanced loans from another financial institution
Are loans that are the result of refinancing one or more loans from a financial institution other than the reporting financial institution. Irrespective of the amount refinanced and irrespective of the amount of any increase, the total amount of the newly originated loan is reported in this category.
3. Increased or internally refinanced loans
There are loans that were already part of the reporting entity's portfolio in the previous reporting period, and during the reporting period, any of the following changes occurred to them:
- increase in the agreed amount
- there were such changes that the original loan was refinanced/transferred to a new loan within the reporting entity. This is a truly new contract, not, for example, just a new arrangement within the refixation of an existing contract. Therefore, the volume of such loans in the CBA statistics is lower compared to "other new arrangements" in the statistics of the Czech National Bank.
The following banks and building societies provide data for the CBA Hypomonitor: Air Bank, Banka Creditas, Česká spořitelna, ČSOB, ČSOB Stavební spořitelna, Fio banka, Hypoteční banka, Komerční banka, mBank, Modrá pyramida, MONETA Money Bank, MONETA Stavební spořitelna, Oberbank, Raiffeisen stavební spořitelna, Raiffeisenbank, Stavební spořitelna České spořitelna, UniCredit Bank.
Disclaimer: Text translated automatically, excuse any imperfections.