Czechs are interested in ever longer fixed period mortgages

January 22, 2021

Almost two thirds (63%) of Czechs expect mortgage rates to be higher in five years than today. Only around 4% of them think they will be lower. If Czechs took out a new mortgage or refixed an existing mortgage today, they would choose longer rates: 30% of people would want a fixed period of ten or more years. Almost a fifth would choose 7-9 years. This is based on a survey conducted by Banka CREDITAS conducted by Ipsos. At the same time, people often think that the rate is automatically higher for longer fixed periods, which is not the case with Banka CREDITAS, for example.

 While currently, according to a survey by Banka CREDITAS, more than half of people (56%) have a 4-6 year fixed period and only a quarter of Czechs have over a 7-year period, they would now choose otherwise when deciding on refinancing or setting up a new mortgage. Now, less than 39% of people would take a shorter fixed period of 4-6 years, 17% of people a longer fixed period of  7-9 years, and almost a third of respondents would arrange a mortgage for 10 years or more. “In summary, every second person (47% of people) would choose a fixed period of more than 7 years. It is interesting that the longest fixed period would most often be chosen by people with higher household incomes, above 60,000 net per month. The survey also shows that people perceive today's rates below 2% as attractive and believe that they will be higher in five years. Logically, they would rather fix the rate for a longer period of time,” comments Lucie Brunclíková, Director of Communications of Banka CREDITAS.

However, the survey revealed two barriers: first, almost two-thirds of respondents (61%) expect that a bank would give them a higher rate with a longer fixed period, which is true for most banks in the market. Second, the survey showed that the vast majority of people (80%) are bothered about conditioning a low interest rate by arranging further, especially insurance, products. In fact, men were significantly more critical of this practice than women. Overall, the interest in a longer fixed period is related to the expectation that in five years the rates will be slightly higher (46%), or significantly higher (18%) than today. About a third of people think the rates will be about the same. Only 4% of people expect a slight decline and only 0.2% a significant decline.

“The current offer of Banka CREDITAS meets the expectations of clients. The lowest rate, namely 1.89%, can be obtained by clients when fixing for ten years, without conditions of the type of compulsory insurance of the ability to repay. We have recently abolished loan processing and online property valuation fees. We now have a special offer where we don’t charge clients a fee when arranging a mortgage and when valuing it by an expert,” adds Lucie Brunclíková.

In the CREDITAS offer, a rate of 1.89% per annum can be achieved for residential real estate mortgages with a loan amount of up to 80% of the value and with a fixed-period rate for 10 years. The second lowest rate is 1.99% per annum with a fixed period of 7 years. Banka CREDITAS has been offering mortgages since September 2019. It provides mortgages with a fixed interest rate, which can be fixed for 3, 5, 7 or 10 years. The amount of a credit can reach up to 90% of the value of a mortgaged property, with the fact that the loan can be secured by more properties. In addition to a mortgage for one's own home, there is also an investment mortgage on offer, where a purchased property is used for rent, as well as a home equity loan, which is a non-purpose loan secured by real estate. One of the advantages is also that a client can choose an insurance provider of the mortgaged property of their choice.

Representative example: Loan amount CZK 2,500,000, maturity 25 years with 300 monthly instalments including principal and interest, instalment amount CZK 10,708, last instalment CZK 10,535.02. Interest rate with a 5-year fixed period of 2.09% p.a., the rate is fixed for the fixed period, not for the entire period of repayment of credit. APR 2.1%. The total amount payable by the consumer is CZK 3,216,977.02. Collateral is the real estate. One-time fees: deposit and deletion of collateral in the real estate cadastre CZK 4,000, extract from the real estate cadastre CZK 250. Real estate insurance costs are not included. The representative example is for information only. The parameters of a credit provided may differ.