What you should know now

Mortgage financing has become more expensive at an almost unprecedented rate since the beginning of the year. By the end of May, the average interest rate on a 10-year fixed-rate construction loan had more than tripled its initial value. Why borrowers should now keep their cool and not accept the first offer when buying and financing real estate.

Many homeowners and those who want to become one of them have been in a panic over the past few weeks. In a few months The average interest rate on home loans has tripled At a fixed ten-year interest rate – starting at 0.8 percent at the beginning of the year. and the Interest rates continue to rise. Construction finance providers are adjusting their conditions at ever shorter intervals. “Sudden rate increases of 0.15 to 0.3 percentage points within a few weeks are not uncommon,” asserts Ingo Foitzik, general manager of construction finance at CHECK24. At the same time, the expert warns consumers who want to own their own home against making quick decisions. Rather, it indicates that interest rates are increasing In a historical comparison contact one Relatively low is moving.

Therefore, interested parties should take care of real estate financing, especially in confusing market conditions, and with the help of an experienced expert. A plan from start to finish. As Stiftung Warentest states in comparing monthly interest rates for mortgage loans The cheapest and most expensive offer To obtain 90 percent financing at a ten-year restricted borrowing rate at the end of April of 2.29 percent or 3.29 percent by a full percentage point. With a loan amount of 400,000 euros and an initial repayment of 3 percent, the monthly installment for a construction loan increases by 334 euros due to the interest rate difference. Instead of €1,763 at a low interest rate, borrowers pay €2,097 per month from the expensive provider. Until the end of the 10-year fixed rate, this will result in building owners and property buyers extra costs From 33,174 euros. So a comparison of the different offerings is just as important for future borrowers as it is for owners who currently want to secure the lowest possible interest rates for follow-up financing.

CHECK24 explains: Follow up on financing for existing loans

For owners who already pay off mortgage At the latest at the end of the fixed rate period A good time to start looking for suitable follow-up funding. They don’t have to take this out with the same bank as before. a Switch to a cheaper bank It is – no matter how long the fixed rate is – but already Ten years after full payment Possible construction loan. From this point, borrowers have Special statutory right to terminate the servicewhich allows them, with a notice period of six months, to To get out of the expensive construction financing.

with term loan Consumers can Securing interest on your follow-up financing for up to five years in advance. This option exists when the loan is offered at the same bank (rollover) and when consumers switch to another provider of their financing (debt rescheduling).

Outlook: Experts expect interest rates to continue to rise

The current increase in construction interest can be attributed primarily to Federal Bond Development Back. There has been a clear upward trend here since mid-December 2021. At the end of January, for example, the yield on German 10-year government bonds was positive again for the first time in more than two and a half years. After a short correction – brought about by the Russian invasion of Ukraine – Bund yields continued to rise relentlessly to about one per cent. Paper bond yields have been hovering around that value since mid-April.

Building rates followed this sharp upward movement. It is not yet clear whether there will be some sort of plateau formation at the moment. Industry insiders tend to expect even the average brand 3% interest on construction loans At a fixed interest rate for ten years Already in the summer can be achieved. Just a few weeks ago, they predicted this sign by the end of the year. However, they also quit European Central Bank Given the high inflation Early exit from their current policy of negative deposit rates on me. According to European Central Bank President Christine Lagarde, mass purchases of government bonds by the central bank will be halted as early as the third quarter. This would increase the pressure on interest rates.

The sample calculation The following table shows a file Serious impact of higher interest rates on monthly payments It has the entire interest expense of the construction loan of more than 300,000 euros with a fixed debit interest for ten years and an initial repayment of three percent.

May 2021 May 2022 Climate forecast
Summer / Fall 2022
loan amount €300,000 €300,000 €300,000
borrowing rate 0.89% p.a. 2.44% p.a. 3.00% p.a
Initial payment 3.0% 3.0% 3.0%
Monthly rate €973 1360 EUR 1500 EUR
Remaining debt
After 10 years of fixed interest rates
205.910 EUR 198186 € 195,194 €
interest expense
Until the end of the fixed interest period
22,832 € €61,996 €75,944

Study: A slight decrease in real estate prices is possible

After all, high financing costs and high inflation can lead to Slight relaxation in purchase prices Providing residential properties that need renovation. A recent study by Immowelt predicts stagnation in prices or slight downward corrections in this segment in 10 of the 14 largest German cities in the coming months. so be In Frankfurt am Main for existing apartments Up to one by the end of the year Prices drop by five percent to account. According to the study, current property purchase prices in Munich are also expected to increase by only one percent over the course of the year.

If the forecast comes true, it will, of course, only be able to weaken the significantly higher monthly burden on borrowers due to the multiplication of construction benefits to a very small extent. there In the medium term also interest rates of four per cent and more It can no longer be ruled out Hey, it still makes sense for security-conscious consumers to look at the current situation Fix interest rates for as long as possible Allow. For example, a 20-year fixed rate is associated with slight interest rate installments compared to shorter fixed interest periods. At the same time, landlords are arming themselves against further increases in interest rates over a long period of time.

CHECK24 Explains: Compare Construction Financing – This Is How It Works

With CHECK24 you can use the most important information about your planned real estate project in just a few minutes Non-binding request Then ask different offers from Compare Mortgage Loans. out of place More than 550 subsidiary banks, direct banks, insurance companies and building societies We determine the right mortgage for you.

In addition, you support CHECK24 Construction Finance Expert After your inquiry by phone and email, we will help you find financing tailored to your personal case. In addition, the counselor will help you Overview of documents to be submitted And keep possible deadlines. This service is also free for you.

Conclusion: waiting can be expensive

Anyone currently planning to finance a construction project or purchase a property should Calculate construction loan costs in your spare time And not to make hasty decisions despite or specifically because of the dramatic rise in interest rates. People interested in their absolute Desirable property and appropriate construction financing They are mainly found in owner-occupied apartments and houses in most cases as well It is still a worthwhile investment. Consumers should not bet on the low interest rates of recent years that will return anytime soon. As experts for the coming months and not with More interest rate hikes By calculations, financing a dream property could become more expensive in the short and medium term. The same applies to follow-up financing of existing loans. Whether and when this will change in the long term seems difficult to predict at the moment due to many uncertain influencing factors.

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