MORTGAGE INTEREST RATES WILL NOT FALL. ON THE CONTRARY, WE ARE WITNESSING THEIR RISE AGAIN

14. 4. 2026

The assumption that mortgage interest rates would reach three percent after inflation—which affected not only the Czech Republic following the outbreak of war in Ukraine—and the associated sharp rise in energy prices had subsided did not materialize. The decline in interest rates halted just below five percent, and despite significant competition in the market, banks were not eager to make further downward adjustments.

Nevertheless, the real estate market is not stagnating. It remains very dynamic, including a steady, gradual increase in prices per square meter across the entire Czech Republic.

Two factors are crucial for the future development of mortgage interest rates:

• inflationary pressures in the economy,
• interest rate swaps (the cost of money for banks).

The CNB will strive to keep inflation under control by raising the interest rates at which banks borrow money on the market, and this will subsequently be reflected in mortgage interest rates as well.

For mortgages, this means only one thing at the moment—we can forget about any significant improvement in interest rates. On the contrary, we are already seeing rates rise again by at least 0.5% or more. Considering these factors, it is likely that interest rates will rise further, and to make their mortgage offers appear more attractive, banks will likely opt for marketing tools such as “free appraisal” or “free drawdown.”

From the perspective of real estate sales and rentals, we can expect a slight cooling of the real estate sales market and, conversely, a strengthening of demand for long-term rental housing. The Czech Republic is thus mirroring the situation in Western Europe, where the share of rental housing is significantly higher than in Central and Eastern Europe. Just for the record—in Germany, rental housing accounts for more than half of the market.

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