Financing more predictable again
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Thanks to stable interest rates, property financing is once again easier to calculate. Property buyers and developers are agreeing ever lower repayment rates and repaying their loans over a longer period of time.
Not only the interest rate, but also the repayment rate has a decisive influence on the monthly financial burden of property financing loans. At first glance, this means that the lower the amortisation rate, the lower the monthly burden. But be careful, that's a naive calculation. Because at the same time, a favourable monthly instalment extends the term of the mortgage and makes it more expensive due to the overall higher interest charge.
Irrespective of this effect, property buyers are currently choosing an ever lower initial repayment rate to repay their loan. In May 2024, the average repayment rate was 1.72 per cent, the lowest level since July 2011. In the same month last year, it was 1.87 per cent and has fallen continuously since the beginning of the year. The amount of the monthly instalment is an individual decision and depends on the financial situation of the future property owner. It should not exceed 35 per cent of the net monthly household income.
At €1,463, the average mortgage instalment for property loans reached its highest level so far this year in May. A year earlier, in May 2023, buyers invested even more in the purchase of residential property at €1,505. Looking back two years, the average financing rate for a home was just €1,190, almost 20 per cent below the current rate. One reason for this is the sharp rise in interest rates since then.
The proportion of equity in property financing continues to fall. In May, the ratio between the required loan amount and the mortgage lending value of the property was 87.21 per cent. A year earlier, this figure was 83.47 per cent; in May 2022, it was significantly lower at 79.83 per cent. The average loan amount in May 2024 was €299,000. Borrowers are currently opting for slightly shorter fixed interest rates. Demand for KfW loans is increasing.
(Photo: © HeungSoon, Pixabay)