A recent survey by Hyponamiru among representatives of selected real estate agencies showed that about four-fifths of those interested in owning their own home are people aged around 30. The remaining fifth are in the older age category. “There can be various reasons behind acquiring your own property later in life. For example, some people need a larger property for a growing family, they buy a second property as an investment or their marriage simply didn’t work out and they are looking for a new home after a divorce. They most often use a combination of a mortgage and their own savings to finance the property. Many older mortgage applicants have an advantage over younger ones in that they already have established careers, higher incomes and savings. On the other hand, they have a shorter time to repay the mortgage and therefore have to count on a higher monthly payment,” says Veronika Hegrová from the fintech startup hyponamiru.
What will change from 1 April 2022?
Since April this year, those seeking a mortgage must meet stricter conditions to obtain a loan. For the first time ever, the limits of credit indicators are set differently for applicants under 36 and older applicants. People over 36 are at a disadvantage. “The LTV, which is the percentage ratio between the loan amount and the value of the mortgaged property, can be no higher than 80% for these applicants. The ratio between the amount of the mortgage applicant’s total indebtedness and the amount of his net annual income (DTI) can be no more than 8.5. The last DSTI is the percentage ratio between the monthly repayments of all loans of the mortgage applicant and his/her net monthly income. Banks will have 5% room to violate these set parameters and approve mortgages with more moderate parameters within this range,” adds Veronika Hegrová.
With the approval of the amendment to the Act on the Czech National Bank, the central bank gained significant powers to set legally binding limits on banks’ credit ratios.
Interest in mortgages will drops
Over the past six months, several unfavourable factors have come together that will lead to a cooling of interest in mortgages. The most significant of these is the sharp rise in mortgage interest rates. Currently, the offer rates for new mortgage loans have already surpassed the four per cent mark and will continue to rise at least in the first half of this year.
Many people interested in owning their own home are now also discouraged by the high prices of new buildings, older flats, family houses and building plots. The prospects for a fall in property prices are not very realistic in the near future, due to the rise in energy prices, which make virtually all building materials and labour significantly more expensive. “The reduction of the LTV ratio and the reintroduction of the DTI and DSTI lending limits by the CNB is another obstacle that will make it even more difficult for people to own their own home. However, some banks have followed the limits all along without interruption or have modified them slightly. This year, according to calculations by our mortgage specialists, around one tenth of applicants will not get a loan or will have difficulty in getting one. The stricter conditions will be felt mainly by young people under 36,” concludes Veronika Hegrová.