DeutschFinancing: Construction interest rates could rise further
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How closely everything is connected to everything else is shown once again by the shocking events in Ukraine. Gas, oil and commodity prices, material costs, inflation rates and interest rates influence each other. Leading financial experts expect rising construction interest rates.
The main task of the European Central Bank (ECB) is to ensure price level stability in the Eurozone. As the guardian of the currency, the ECB, together with the central banks of the European states, is the source of refinancing for credit institutions. It determines the monetary policy for the euro area.
The ECB's decisions have a direct influence on construction financing. Due to the current framework conditions, the European Central Bank is currently tightening its monetary policy. In the process, interest rate developments are caught between high inflationary pressure on the one hand and a subdued economic outlook on the other.
Interest rate turnaround looms
ECB chief Christine Lagarde expects an inflation rate of 5.1 per cent for 2022 and 2.1 per cent for 2023. A faster reduction of bond purchases than planned should counteract this. A first interest rate step is expected at the end of this year or the beginning of next year at the earliest. There are currently no signs of a massive countermeasure as in the USA. Due to the great uncertainties caused by the Ukraine war, the ECB chief is reserving maximum flexibility. Moreover, the scope for possible interest rate increases is limited because this would also affect the most indebted euro countries. The central bank obviously wants to take its time for the interest rate turnaround.
This now applies to construction financing
Consumers planning real estate financing must expect fluctuating rates. In the long term, experts expect interest rates to rise. Now is still a good time for follow-up financing and debt restructuring. The expectation of an interest rate turnaround in Europe will gradually be priced into real estate transactions.
(Photo: © Alexander Stein, Pixabay)