With the ECB's key interest rate increase to 1.25 percentage points, interest rates for real estate financing are also on the way up again after a brief downward trend, as Finanztest found in a building rate comparison of more than 70 banks.
Interest rates are once again approaching the year-to-date high of three percent. The latest ECB decision affects the so-called main refinancing rate by three-quarters of a percentage point to 1.25 percent, the construction interest only indirectly. The most important indicator are the interest rates for ten-year Bunds. Because they largely determine the yields for Pfandbriefe, which in turn are used by banks to refinance real estate loans.
After interest rates had fallen surprisingly sharply in July, the trend is now pointing upwards again. "Finanztest" suspects that the downward movement was merely a "breathing space". The interest rate trend is now pointing upwards again. At the end of August, the average effective interest rate for loans with a ten-year fixed interest rate was 2.90 percent. With 20 years of fixed interest rates, it was 3.26 percent.
The state-owned KfW bank has also become expensive. Since the beginning of August, it has increased the interest rate for loans in the home ownership program with a ten-year fixed interest rate in five steps from 2.74 to 3.35 percent - and was thus recently significantly more expensive than many profit-oriented banks.
If you want to finance 80 percent of your property and choose a ten-year fixed interest rate and three percent repayment, you can expect a construction interest rate of 2.49 percent ("DTW") at best, according to current calculations by Finanztest. In July, building interest was still available for 2.46 percent. With a 20-year fixed interest rate, the cheapest offer is currently 2.79 percent ("Creditweb").
According to the testers, real estate buyers will probably have to adjust to interest rates of 3 percent and higher in the longer term. In a long-term comparison, however, this is still cheap. But for most borrowers, given high home prices and skyrocketing energy costs, that will be cold consolation.
The comparison portal Check24 has already established that in any case the average construction financing will increase by a few thousand euros within the term by the end of this year. The average financing amount has already fallen by ten percent over the past three months. Fewer customers can therefore afford to take on very high financing sums. In addition, banks are acting more restrictively when it comes to lending.
With construction financing at an effective interest rate (the total costs that have to be paid for a certain loan amount) of 3.0 percent for a loan of 500,000 euros, this means a higher interest expense of 98,538 euros until the end of the ten-year fixed interest rate. At the beginning of the year, the effective interest rate was still 0.8 percent. The monthly rate for house or apartment buyers increases in the example by 916 euros. At 4.0 percent, it would even be 142,698 euros more interest costs than in January 2022.
Building loan interest comparison
(This article was first published on Tuesday, September 13, 2022.)