100% mortgages end in the Czech Republic
From 1 October 2016 banks in the Czech Republic will only be able to offer mortgages of up to 95% of secured immovable property without incurring higher mandatory reserves. The Czech National Bank (“CNB”) has issued its recommendation, which comes as a result of a successful test performed recently in the Czech banking sector. The CNB cannot impose a ban on 100% mortgages, however, the recommendation is regarded by banks as binding and if not followed the CNB may require higher mandatory reserves from banks that do not follow the recommendation. The 95% - 100% mortgages comprise only 9% of the total mortgages on the Czech market.
Early mortgage payments to be free of charge
Meanwhile, as previously discussed, from 1 December 2016 clients receiving a new mortgage will be able to repay up to 25% of their mortgage early and free of charge even in their fixation period. This comes after a long debate in the Parliament, which amended Act No. 100/2016 Coll., on consumer credit (the “Amendment”). The clients who already entered into mortgage contracts prior to 1 December will be able to make repayments early without incurring additional fees but only after their fixation period expires. The Amendment also allows for early repayment of the whole mortgage with fewer drawbacks for the clients. Current market standard made clients pay about 5% for each year left in the fixation period. As of the beginning of December clients will pay the bank only its reasonably incurred costs.