More expensive real estate financing: construction interest on ten-year loans over three percent

More expensive real estate financing
Interest rates for ten-year loans over three percent

Construction rates are on the rise. Is strong. Anyone who borrows real estate finance today must pay out more than 3 percent interest for the first time in more than ten years. And that shouldn’t be the end of the road.

Loans for property buyers in Germany are becoming more and more expensive. The average effective interest rate for ten-year loans rose above the 3% threshold for the first time in more than ten years on Wednesday, Frankfurt-based financial advisory firm FMH announced. Interest rates above 3% for ten-year construction loans were last observed on April 5, 2012.

The most recent rise in interest rates since June 7 was “particularly extreme” with a jump from 2.79 to 3.02 percent in one week. The trigger is likely high inflation and the announcement by the European Central Bank that it will raise key interest rates.

Loans for home buyers are likely to get more expensive, FMH founder Max Herbst expects. In April, he thought a 4 percent interest on a ten-year loan to the end of the year was conceivable. Now it is conceivable “after the summer break”. Interest rates have risen sharply in recent months. As of December, the interest rate for the 10-year loan was still 0.9 percent.

The level of interest rates on the capital markets rises

The reason for the increase in interest in construction is the generally rising level of interest rates on the capital markets. Due to high inflation, central banks are under pressure to tighten their accommodative monetary policy. The US Federal Reserve will decide on further steps this Wednesday. The rate is expected to increase by at least 0.5 percentage points over a range of 1.25 to 1.5 per cent.

After much hesitation, the European Central Bank (ECB) has also decided to exit its ultra-loose monetary policy: purchases of multi-billion dollar bonds will end on 1 July. At the latest at the next regular meeting of the ECB Council on 21 July, the central bank intends to raise the key interest rates again for the first time in eleven years, initially by 0.25 percentage points each time. However, the Governing Council of the ECB will hold an extraordinary Council meeting this Wednesday.

Compare the conditions for building money here.

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