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“We will have to fight,” sighs Petr, who lives with his family near Prague. He alludes to the situation he found himself in after their mortgage fixed rate ended and the payments suddenly jumped dramatically.
His household is one of three whose struggle with the pitfalls of financing their own housing is continuously monitored by Seznam Zpravy.
While in March the families said goodbye to plans for reconstruction, for example, in June they described negotiations with the bank or plans to sell the property.
Their stories are unlikely to be unique. Mortgage expert Libor Ostatek from Golem Finance estimated in the spring that the fixation of more than 100,000 mortgages will end this year alone.
A third higher installment
Petr works for the state for a tabular salary. His wife returned to work part-time after parental leave.
He took out a mortgage for the house in 2015, totaling 8.1 million crowns.
Already in the spring, he described that the increase in installments actually represents a hopeless problem for them – they cannot do much with their income. “I have a tariff grade. If they even promote me, that’s a jump of two to two and a half thousand net crowns. And add inflation to that,” explained Petr.
They tried to reduce expenses to a minimum. Last winter, when energy prices went up, they radically solved the heating problem. The ten thousand arrears forced them to purchase a fireplace insert, and since December they have not been able to heat with electricity. They are also pushing to reduce other expenses.
In June, Petr admitted that it had an effect on the atmosphere and that there were also partner arguments. Among other things, also because, despite the difficult financial situation, Peter’s wife would like a second child.
In September, Petr learned that instead of the current 30,000, he had to pay 40,000. He managed to reduce the installment only symbolically – to 39,000.
“About a week ago, I got a call from the bank saying that we are in financial trouble, and that is nonsense. I put in a request to lower the installments and I made a relevant proposal for it,” says Petr, who tried to explain the situation to the bank.
The reduction in repayment meant that the repayment period would be extended without him having an entry in the bank register that could harm him in dealings with the bank in the future. “They will extend my repayments by less than a year. You pay for everything, they don’t give you anything for free. So we went for it,” he reports.
How will he handle an increase in the monthly payment of 9,000 crowns? “They told me there was nothing more they could do about it. We will have to fight.”
“It’s Unresolvable”
The mortgage of the monitored households of entrepreneur Radek from the Pardubice region grew most rapidly. Instead of 16,500 crowns, he started paying 32,000 a month. After the discount, as he was originally supposed to repay 35,500 crowns.
He took out a mortgage for five million in 2018 and undertook to repay it for 27 years. He lives in the house with his wife and daughter, their grandmother also moved in during the year.
At the beginning, the interest rate was 2.2 percent, which gradually fell to 1.95 percent. Currently, however, it has risen to 6.5 percent.
He has been paying the higher mortgage since May, while the bank gave him a three-year fixation. “I contacted other banks and they all have the same plus or minus,” he said in the spring, emphasizing the paradox that before approving a mortgage, the bank checks its ability to repay, but when the fixation comes to an end, it no longer decides whether the client can afford the repayments or not.
He calculated that his family has a total monthly cost of around 68,000 (food, electricity, necessary transport, rings for his daughter and mortgage), but the income with his wife is around 50,000. In three years of fixation, the family budget will be roughly 650,000 in the red.
The entrepreneur, who until now was supported by the e-shop, describes that he recently received another blow: he also has to solve business problems.
“The Polish e-shop is beating us,” he says. “They made huge warehouses where they brought goods by ship and train. It’s completely, totally destroying us,” he misses and sees the future bleakly: “We’ll probably finish. It’s one blow after another.’
According to him, he is waiting to see if Christmas will help him. “Usually, e-shops work in such a way that you make a whole year’s profit over Christmas and then you survive to make a profit on taxes,” he explains.
He admits that if sales do not improve by the end of the year, he will have to look for another job and possibly sell the house he lives in. In June, he described that he owns a second house near Pardubice, which he has already moved out and is trying to sell.
“Of course we didn’t sell it. Every now and then someone comes forward, but I’m still at a dead end,” he notes. Again, unluckily, according to him, the problem is that mortgage rates have risen, so people don’t want to buy real estate.
They fixed our mortgage – a story of three families
Read the previous parts of the time-lapse project List of Mortgage News:
I will pay off
For František from the Liberec region, the installments nominally did not increase so dramatically – from 4,600 crowns in January to almost 5,600 crowns in February.
But in the end, the family realized that continuous repayment with an increased interest rate no longer made sense for them and they wanted to get rid of the mortgage as quickly as possible.
“If it works, it will happen sometime during the winter. Now I’m saving, I want to pay it off at once, there are penalty fees for multiple extraordinary installments,” plans the man who lives with his wife and son, the other two children have already become independent.
In 2007, he took out a mortgage for 900 thousand crowns. The total income of the household is around 60,000, so an increase in the repayment of 1,000 is not a problem for the family on paper.
The situation is complicated by the fact that František subsidizes two other households from his income. “As energy prices started to rise, my father’s pension was not enough and I had to start supporting him,” he says, also mentioning that he is helping his sister who is recovering from the death of her husband.
There was a slightly positive development for both loved ones. The sister paid off the debt, with which František helped her financially. Father received an overpayment for energy – during the winter he heated with wood that František bought.
The Liberec household can thus fully concentrate on saving on the side for an extraordinary installment. They need to pay approximately 400 thousand crowns. “I’ve already saved most of it. If there is no hitch – that I would have to invest in something, or maybe my sister’s health is important – then it could work out,” he hopes.
His insecurity stems mainly from the experience he had with relatives – they got into trouble and fell through the state safety net.
“It’s scary and I don’t want to single myself out, I just take it as a reality, if I didn’t have the income I had, my dad would be a pensioner in default and my sister would probably have to sell the shack.”
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