MORTGAGES IN THE CZECH REPUBLIC: FALLING RATES AND GROWING DEMAND

According to the Hypomonitor of the Czech Banking Association (CBA), in July 2025 banks and savings institutions granted mortgage loans amounting to CZK 37.8 billion, an increase of 2% compared to June. Growth was driven mainly by new mortgages without refinancing, which reached CZK 30 billion (+3%), while the average interest rate fell from 4.56% to 4.53%. During the month, almost 7,000 new contracts were signed, representing a 34% increase compared to the previous year. These figures show that the market is becoming dynamic again: more families are considering mortgages as a concrete option after years in which high rates had curbed purchases and reduced access to credit. This is therefore not just a cyclical rebound but also a sign of greater confidence in the country’s economic outlook.

Why it is a positive signal

The increase in mortgages combined with lower rates indicates confidence and support for the economy. A more affordable monthly installment means greater opportunities to buy a home, which stimulates the construction sector, a key driver of jobs and investments. Construction companies, craftsmen, and suppliers all benefit, with positive spillovers across the entire supply chain. Buying a house also triggers additional consumption such as furniture, appliances and maintenance, generating a multiplier effect that reinforces growth. This dynamic also contributes to a climate of socio-economic stability, which is particularly important as the Czech Republic, like other European countries, is consolidating recovery after the pandemic and international instability. Banks also benefit: higher mortgage volumes mean more profitability as well as more loyal clients, with a positive impact on the entire financial system.

The issue of housing prices in Prague

Despite lower rates, the main obstacle remains the cost of housing, especially in Prague. The sharp imbalance between incomes and property values limits market access for large segments of the population. Higher demand, driven by easier access to mortgages, risks fueling further price increases, worsening the exclusion of young people and middle-income families. The shortage of new affordable housing projects further reinforces speculative dynamics, polarizing the market: on one side, high-end properties; on the other, a scarce and increasingly unreachable supply for those with limited resources. It is therefore not surprising that, despite the recovery in mortgage lending, social frustration linked to high housing costs remains very strong and continues to be one of the most debated issues in political and urban discussions.

General implications

On one hand, more accessible mortgages provide stability and prospects for buyers; on the other, they widen the gap with those who remain tenants. Rents, already high, tend to increase further, eroding disposable income and the ability to save. This weighs particularly heavily on younger generations, who see the goal of homeownership, traditionally perceived as a tool of economic security and wealth-building, moving further out of reach. In the long term, such polarization may hinder social mobility and reduce opportunities to accumulate capital, with demographic consequences as well: fewer economic certainties often mean lower willingness to start a family or have children. A society divided between owners and renters risks being less cohesive and more vulnerable to economic shocks, reducing the country’s overall competitiveness.

Conclusion

The decline in rates and the growth in mortgages represent a real opportunity for the Czech economy and many families. However, without targeted measures to contain housing costs, especially in Prague, the benefits risk being concentrated only among those who already have sufficient income and capital. Policies are needed to expand the housing supply, support young buyers, and discourage speculation. In this way, the growth of the credit market can become a tool for inclusive development, capable of reducing inequalities and strengthening social cohesion. Only coordinated and long-term housing policies will consolidate these positive signals, turning them into sustainable and lasting growth for the entire country, balancing economic stability with social justice.

Sources: https://byznys.hn.cz/