Real estate prices are already high, and now interest rates on loans are also skyrocketing. Even many high earners can no longer fulfill their dream of owning their own home, as bills show.
For years it was the skyrocketing prices for houses and apartments that turned the dream of owning a home into a financial feat. But if you had enough equity, you could be sure of getting a super cheap loan. Now this pillar of buying real estate is also collapsing.
Interest rates for real estate buyers have recently skyrocketed. For the first time in ten years, the average effective interest rate for ten-year construction financing is more than three percent, FMH-Finanzberatung determined this week. Compared to the previous week alone, interest rates jumped from 2.79 to 3.02 percent. And that was after interest rates had so reliably hovered around below 1 percent between mid-2019 and the end of 2021.
In its own evaluation of offers, the finance portal comes to an average effective interest rate of just under three percent for ten-year financing – the determined 2.91 percent is still an eight-year high. And: According to Biallo, if you want a longer fixed interest rate of 20 years, you have to expect an average interest rate of 3.33 percent. At the beginning of the year it was only 1.35 percent.
Interest rate turnaround in building interest is here
The figures show that the turnaround in interest rates, which is intended to curb the high inflation rates, has already reached construction interest rates. The major central banks are only just beginning to tighten their ultra-loose monetary policy and raise interest rates. But it is clear that banks will be less able to obtain money cheaply in the future and therefore they will no longer give out the money as cheaply themselves.
But is three percent interest so bad? After all, we already had more than 8 percent building interest in Germany, most recently in the 1990s. At that time, however, real estate prices – and thus often the loan amounts as well – were still significantly lower. High prices are now meeting rising interest rates. Precisely because credit was so cheap (and many other investments weren’t worth it), people have been willing to pay skyrocketing real estate prices in recent years.
In this situation, rising interest rates have a particularly strong impact, as a recent study showed. Even with an increase in interest rates to 2.5 percent, the housing costs for owner-occupied property double. According to the calculations, renting is cheaper than buying in many areas from interest rates of three to three and a half percent.
Less house for the same money
Above all, however, the rise in interest rates can mean that even more and more high earners can no longer afford to buy a house. calculated this using two examples. In the first sample case, the family of three has a net income of 4500 euros, of which they can spend 1350 euros a month on interest and principal. She has saved 80,000 euros in equity for this purpose. She wants to take out a loan with fixed interest rates for 15 years and be debt-free after 30 years. A year ago, the family could have afforded a house for 448,500 euros thanks to the low borrowing rate of 1.3 percent, FMH calculates. However, since the borrowing rate has risen to 3.15 percent in the meantime, and with it the burden of debt service, the house may now only cost 366,500 euros under the same conditions. In coveted areas, the family will hardly find anything for this price.
In a second example, a family with a very generous net income of 6,500 euros per month and 120,000 euros in equity is trying to finance it on similar terms. A year ago she would have gotten her own home for a purchase price of 650,000 euros, but now the interest is eating up so much that it is only enough for a purchase price of 534,000 euros.
Since the calculations are based on figures from the end of May, they would be even less favorable today. And families’ dreams of a house are likely to continue to dwindle. Biallo asked twelve experts from banks, insurers and credit brokers about their expectations. All twelve expect construction interest rates to continue to rise. Many consider 4 percent interest for ten or fifteen-year fixed interest rates to be realistic this year.
Source: Stern
Jane Stock is a technology author, who has written for 24 Hours World. She writes about the latest in technology news and trends, and is always on the lookout for new and innovative ways to improve his audience’s experience.
