The Czech National Bank (ČNB) has decided to cut its key 2T repo rate by 0.25 percentage points to 3.75%. This decision impacts the entire economy and directly affects your accounts, deposits, and mortgage interest rates. So how will these changes reflect in your finances?

Savings Accounts and Term Deposits

With lower interest rates, banks will further reduce the interest on savings accounts and term deposits, which may no longer cover inflation. This means your deposited money will lose purchasing power. In your own interest, it’s necessary to move reserves exceeding six times your monthly expenses into investments.

Suitable options include conservative bond funds or real estate funds. If you have a longer investment horizon, equity investments may also be an interesting choice.

Mortgages

Rate cuts by the ČNB usually lead to lower interest on new mortgages and refinancing. However, the expectation of rate cuts is already priced into current rates, so we can’t expect a significant drop in mortgage costs.

If your mortgage’s fixation period is approaching, it’s worth monitoring bank offers and considering refinancing under better conditions. As we’ve mentioned in previous articles, we also help clients negotiate lower interest rates with their current bank — even during the fixation period!

Impact on Property Prices

Lower interest rates will increase demand for properties, meaning their prices will continue to rise. According to ČNB analysis, apartment prices in 2024 grew by 4.1% year-on-year, with the growth rate accelerating in the second half of the year and reaching nearly 7% in Q3.

This trend is influenced not only by lower mortgage rates but also by declining interest on savings accounts and term deposits. As a result, more people are looking for alternatives to grow their money — one proven option being the purchase of investment apartments.

However, this option needs careful consideration. Our company, Stone & Belter, can help you not only with financing but also with selecting the right investment apartment. We’ll also help you assess whether it might be more advantageous for you to invest in another form rather than physically buying property.

How to Prepare?

• If you’re saving, check whether it’s worth redirecting part of your savings into fixed-rate products.

• If you’re considering a mortgage, you may see gradual rate reductions, but we still recommend monitoring the market regularly.

• If you already have a mortgage, find out when your fixation ends so you can respond to interest rate developments.

Lowering interest rates is part of monetary policy aimed at supporting economic growth and keeping inflation under control. If you have any questions about how these changes might impact your finances, don’t hesitate to contact us.