Interest rates for mortgage loans have remained virtually unchanged since the beginning of the year. The inflation rate has not yet prompted the European Central Bank to cut interest rates. However, interest rate cuts are likely by the end of the year. The current stability gives prospective buyers more security when purchasing property.
Good news for the economy and consumers: the inflation rate in Germany was plus 2.2 per cent in March 2024. The annual average for 2023 had been plus 5.9 per cent compared to the previous year.
This means that the inflation rate is now approaching the target of 2.0 per cent. This could prompt the European Central Bank (ECB) to lower its key interest rates at its next meeting - which should boost the economy and the property sector in particular. The ECB's key interest rate has been at 4.5 per cent for months. It seems certain that the central bankers will lower it this year - only the timing is still uncertain.
The monetary authorities have a lot to consider when changing the key interest rate: economic growth is stagnating and market expectations are subdued. The persistently high interest rates are making it difficult to finance urgently needed construction projects. Lower interest rates would stimulate the economy, which is currently bobbing along.
High lending rates are poison for the economy, especially for the construction industry, but they are important to curb inflation. Inflation is falling, but the target has not yet been reached and core inflation will remain above two per cent for some time to come. There are also concerns about a wage-price spiral, in which wage increases are merely an adjustment reaction to the inflation trend.
Conclusion: The majority of experts assume that construction interest rates for ten-year loans will range between 3.5 and four per cent in the coming months. Due to the fall in property prices and the stable situation regarding building interest rates, investing in property is currently easier to plan again.
(Photo: © Klimkin, Pixabay)
