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Risks of Mortgage Loans in the Czech Republic

Jaroslav Tichý ()
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Jaroslav Tichý: University of Finance and Administration/Faculty of Economic Studies, Department of Finance

ACTA VSFS, 2015, vol. 9, issue 1, 59-73

Abstract: Indebtedness through mortgage loans is dominant of household debt in the Czech Republic. The gradual increase in the household debt level may also entail increasing credit risk assumed by banks in connection with their credit exposure to this sector. The objective of the paper is to verify the risk and identify factors that affect the credit risk development in the Czech Republic. We look for correlation between the risk development and the interest rate development. Furthermore, we verify links between the risk and the development of real estate collateral value. The paper does confirm that there are real risks associated with the potential increase in interest rates. No significant risks have been confirmed with regard to the current development of the residential property value. The paper also strives to provide an identification and verification of risks stemming from individual banks’ internal processes. It features a detailed analysis of the internal factors (aspects) comprising revenue, competition, as well as distribution.

Keywords: mortgage loans; credit risk; real estate/property prices; interest rate; commission; competition (search for similar items in EconPapers)
JEL-codes: G21 G28 (search for similar items in EconPapers)
Date: 2015
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Handle: RePEc:prf:journl:v:9:y:2015:i:1:p:59-73