Czech Mortgages Grow to Record in 2020 Despite Pandemic

New mortgages in the Czech Republic grew by 34.3% year-on-year in 2020 to a record volume of 217 billion crowns, despite the global coronavirus pandemic’s impact on lending, data from the Czech National Bank showed on Friday.

The central bank has been monitoring the mortgage and housing market in recent years as a potential source of inflationary pressures caused by soaring property prices.

House prices were 17% overpriced on average, the bank said in November as it warned against risks to both banks and the broader economy.

Low interest rates supported the demand for mortgages, as the central bank has kept its main two-week repo rate at 0.25% since last May after it had slashed it by 200 basis points during the first coronavirus wave in spring.

The bank also eased some of the limits on mortgage lending in April, like the share of the loan to the property price (loan-to-value, LTV) or the maximum share of payments on the clients’ income (debt-servicing-to-income, DSTI).

Overall, new and refinanced mortgages rose by 39.6% year-on-year to 266 billion crowns, the data showed, while household loans added just 0.8% to 264.5 billion crowns.

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