Fewer bank clients are opting for incentivised savings for home construction, renovation and refurbishment, Czech Radio reported on Friday, attributing the drop in interest to a lower state subsidy than in the past. According to the public broadcaster, 267 thousand clients signed contracts in the first half of 2015 – almost a third fewer than the same period last year. At the same time, an in interest in construction mortgages has reportedly gone up.
Just a few years ago and certainly prior to the financial crisis of 2008, incentivised building savings plans were a welcome option eagerly snapped up by clients; at one point, it seemed almost every family or expecting couple had signed up. Plans today, Czech Radio reports, are drawing far fewer interested clients. The reason? Lower interest, high bank fees and a lower state subsidy have all combined to make the package less attractive.
Potential clients have to weigh whether the option of freezing funds for six years with a lower return is still worth it or whether to invest their money otherwise or leave it lying in the bank. But analysts suggest that building savings are still advantageous, compared to the poor interest offered on standard savings or some time deposit accounts. The state still offers a maximum injection of 2,000 crowns per year and the savings are guaranteed. It may not be a lot but for anyone not willing to try a mix of higher risk portfolios, they are safe.
Money accumulated in the plans no longer has to be used for construction or home planning per se, but is alternatively often used to fund children’s education or stays abroad. That said, a poll by the Association of Czech Building Savings Banks, suggests that two-thirds of all savings are spent on renovation of homes or new interior decorating.
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