Immo-Gazette Nr. 05-20: What about financing?
Why are banks so hesitant?
Published on: , by
It's weird. On the one hand, the average interest rate for real estate loans is, purely optically, in the range of 0.5 percent (although some banks are said to have even offered a negative interest rate for mortgage loans!); on the other hand, it is becoming increasingly difficult for buyers to obtain a commitment for a real estate loan at all. We feel this in extremely long waiting periods until a final commitment, and in refusals that are inexplicably and sometimes after weeks of hoping given to the customer without explanation.
How this is connected is currently not being discussed publicly, especially as credit institutions do not let themselves be put in the cards in individual cases.
For us as real estate brokers, the following scenario is emerging after numerous discussions with financing brokers: the general risk of default on a loan is apparently seen as the greatest risk factor for a real estate loan due to the great unknown in terms of job losses, future further restrictive measures such as home office or short-time work, as well as increasing real unemployment with all its consequences.
Only yesterday, a customer who had applied to his house bank - a local savings bank - for financing for a 3-family house and had also been approved, told me that his banker advised him that (despite a very good credit rating) he would have to kick slowly for now. In addition, you must know that this customer lives from finding, buying, renovating and renting out old houses in the Rhine-Main area, with very good success and for many years.
But the much more important information he gave me was the following: his banker slipped him the information that the Sparkasse is currently not financing any new customers at all - as first-time buyers of real estate - because the risk is much too great. So the risk of an unsecured income and therefore the risk of not being able to service a loan is actually considered too high. This is certainly not the only case.
And that with an interest rate of less than 1 percent - with the possibility of a repayment of 4-6 percent. I certainly remember my first real estate financing, with an interest rate of 6 percent for the first five years, which then jumped to 9 percent after the fixed-interest period expired - in other words, 50 percent more in interest payments per month! The repayment was a meagre 1 percent.
I think that if the financial institutions are already storing the money at the ECB at negative interest rates, then it would be more than justified and economically in every respect a duty to pour it onto the market more than ever, regardless of all the risks that may never come to bear - and if they do, it can still be absorbed by suspending repayments in periods of hardship.
May some bankers think about what it means to help younger families to a safe home, especially in these times.
*** Translated with www.DeepL.com/Translator (free version) ***