Borrowing in Czech in order to finance property purchase has always been very convenient and easy for non-residents.

Foreign applicants are treated the same way as locals and the application process is pretty easy and straightforward.

Moreover, the mortgage rates are very attractive, if not the most attractive in the CEE region, mainly due to the low interest rates and high LTVs. Below, is the table showing available rates for non-residents in Czech Republic, Poland and Slovakia.

Country LTV Term, years Interest rates in local currency -

Czech Republic 85-90% 5-35 y From 4.99%
Poland Up to 90% Up to 30 From 7%
Slovak Republic Up to 90% Up to 30 From 5.5%

As we can see borrowers in Czech Republic enjoy very good mortgage terms. Moreover, the terms are improving.

And loans are getting cheaper!

Mortgages in Czech Republic are granted predominately in local currency (CZK) and base rate, set by the Czech National Bank, determinates the level of mortgage interest rates. The base rate is the lowest in the CEE region and currently stands at 3.5% only (4.25% in Slovakia and 6% in Poland).

The Czech base rate has been cut on 8th August by 0.25% in order to weaken strong Czech crown and support economic growth. It was not expected by the banking sector, but the response from the sector was clear - interest rates, including mortgages, have slowly started to decrease.

The first bank, who cut its interest rates, was Komercni Banka, followed by Ceska Sporitelna.

They cut the rate by 0.5% and 0.4% respectively.

Consequently, now the mortgage rate start from 4.99% in Komercni Banka and from 5.19% in Ceska Sporitelna. For an average 20-year mortgage worth CZK1.8 million such a reduction translates into monthly payments lower by CZK300 and CZK500.

In general, Czech banks have been slow in reacting to the central bank cut and banks like Hypotecni banka, mBank and Raiffeisenbank lowered the mortgage interest rates only this week.

Other banks are expected to follow the trend forced by strong competition.
The cuts might not be huge, but will positively impact borrowers who apply for a mortgage or who are planning to do so. It will also apply to people, who already have a mortgage and the fixed period is ending soon.

The August cut was the first in the last three years, further cuts are not likely due to the inflationary pressure (inflation stands at 6-7%, well above the target of 2%). However, the central bank board member, Pavel Řežábek, said that the bank may consider further decreases in response to a slowing economy.

Demand for mortgages is picking up

In the first half of 2008, most of the Czech banks reported a slowdown in the sale of mortgages. However, in July and August several banks reported that the situation is improving and mortgage sales are picking up. That could be partially accounted by decreasing interest rates.

Hypotecni banks recorded 11% growth in July and August in volume of mortgages. Raiffeiesen concluded 20% more mortgage contracts in the summer months. Unicredit reported 30% growth in volume of mortgages in the same time.

The figures show that Czechs are keen on borrowing in order to buy a house and the property market still has big potential for growth.

Stronger demand for housing is expected in the autumn, when several mortgage promotional campaigns are traditionally launched by banks.