Why payments are rising sharply
In 2021, at the height of the pandemic, banks issued housing loans at record low rates — often below 1%. Many borrowers fixed these conditions for the standard five years. Now this period is ending, and current offers from Slovak banks start on average from 3.5% per year. For an ordinary person, this means an almost fourfold increase in interest.
A typical client story perfectly shows the scale of the problem. According to Slovak journalists, a borrower named Patrik took out a one-room apartment five years ago at a rate of 0.59%, and his grace period ends in September. He previously paid 410 euros, and at the new rate of 3.5%, the payment will approach 600 euros per month.
Such an increase means an additional 170–200 euros per month, or almost 2,400 euros in annual expenses. And this may not be the limit. The European Central Bank continues to fight inflation and has already raised the base rate in June this year. According to expert forecasts, two more increases of 0.25% are possible by the end of the year, which will lead to an increase in loan costs up to 4%.
Who is most at risk
This transition will hit the budgets of those who bought housing at the limit of their financial capabilities the hardest. Among them are many Ukrainians who recently bought property in Slovakia, counting on stable monthly expenses and low rates.
A sharp increase in financial burden threatens a wave of debt and personal bankruptcies. The real estate market is also reacting: a drop in demand due to expensive loans is already forcing sellers to adjust prices for apartments and houses.
What to do if your preferential rate period is ending
The main rule is not to wait for the bank to send you an official letter. This usually happens only two months before the conditions change, when there is almost no time left for financial maneuvers.
Contact your bank in advance and ask to review the terms. Banks often accommodate reliable clients to avoid losing them and may offer a rate lower than the standard price.
Consider offers from other banks for refinancing. If a competitor offers a significantly better rate, the switch may justify even the associated costs for the cadastre and appraisal.
Agree to extend the loan term. If you stretch the repayment, for example, from 20 to 30 years, the monthly payment will decrease. However, remember that in the end, you will overpay the bank significantly more.
Start building a financial buffer right now. If there is still time before the end of the fixation, try to set aside the difference between the old and the expected new payment into a separate account this month.
If none of the options help reduce the financial pressure, you will have to consider selling the apartment and buying cheaper housing. But timely negotiations with the bank in most cases allow you to avoid such a radical scenario.
⭐️ If you don't want to overpay and need help refinancing your mortgage — we recommend contacting a licensed mortgage consultant — write to us at @kompas_support, and we will share a contact with you.
