Building interest rates on the move

Property buyers and builders are again taking out higher loans for financing. Ten years ago the average was 145,000 euros, five years ago it was 193,000 euros, and now the loan amount for construction financing is over 300,000 euros.

As long as property prices continue to rise and interest rates remain low, loan amounts are not expected to decline. Dr. Klein Privatkunden AG regularly calculates the so-called standard rate in order to make long-term comparisons. This is based on a loan amount of 150,000 euros, two percent repayment, 80 percent loan-to-value ratio and ten years fixed interest. 

At the beginning of 2021, the monthly instalment calculated in this way was 368 euros, in April 2021 394 euros. A long-term look back shows how favourable financing currently is: In April 2011, a monthly instalment of 803 euros was due for a loan with the standard data mentioned, five years ago it was 454 euros.

Mortgage borrowers are currently securing their interest rates for a relatively long period of time with an average of 13 years and two months. Long-term fixings are somewhat more expensive, but they offer planning security and create flexibility. After ten years, the loan can be terminated and rescheduled. In return, there is then a time buffer for observing the interest rate market. 

Borrowers can still be relatively relaxed about interest rate developments at the moment. What happens next depends largely on the course of the European Central Bank. Mortgages have become somewhat more expensive in recent weeks. The slight increase in inflation is gradually coming more into focus. This is associated with the expectation of possible interest rate increases by the central banks and, as a consequence, higher construction interest rates.

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