The ECB raised interest rates by 50 basis points in July and by 75 basis points in September to 1.25 percent. Therefore, according to the National Bank, the interest rate for new housing loans in Austria reached 2.08 percent, the highest since February 2017, which means an increase of 96 basis points compared to the low of 1.12 percent in March 2021.
According to the Oesterreichische Nationalbank (OeNB) in a press release on Thursday, the development is being driven in particular by the sharp rise in interest rates for fixed-interest (or long-term interest-linked) financing.
At the same time, the interest rates for the entire outstanding portfolio of housing loans rose sharply for the first time in July and August, in particular due to interest rate adjustments on loans with variable interest rates. And new lending experienced a reduction in August 2022, partly due to significantly higher interest rates.
With long-term conditions (ie at least 10 years) for new loans, interest rates rose by 125 basis points year-on-year to 2.55 percent. In the area with variable interest rates (or with a short-term fixed interest rate of up to one year), interest rates rose by 51 basis points to currently 1.44 percent.
Less demand for the first time
Measured against all new business (in addition to the newly granted loans, the loans to create and maintain living space that were renegotiated in the respective month) the capital-weighted average interest rate in August 2022 was 1.93 percent, 73 basis points above the previous year’s value of 1.20 percent.
But the interest rate on the entire outstanding housing loan portfolio has also risen. The capital-weighted average interest rate for households rose by 15 basis points from June to August to currently 1.56 percent. This was due in particular to the comparatively high proportion of loans with variable interest rates at 47 percent of the total portfolio of housing construction loans, which are directly affected by the current changes in market interest rates. The interest level of these variable-interest loans rose by 30 basis points between June and August.
While the demand for housing loans – despite rising interest rates – remained high up to and including July 2022, a significant reduction in new lending has now been observed for the first time. In August 2022, new loans granted within Austria to create and maintain living space reached EUR 1.267 billion, their lowest value since the beginning of 2017. The sharp decline in August is closely related to the rising interest rate level, with rising real estate prices and persistently high inflation further reduce the affordability of real estate.
According to the OeNB, the high demand for housing construction loans in the previous months is due to anticipatory effects before the interest rate increases and the Credit Institutions Real Estate Financing Measures Ordinance (KIM-VO), which came into force on August 1, 2022. The ordinance provides for stricter requirements with regard to residential real estate financing in Austria.
Source: Nachrichten
