The property market is still on the upswing at the start of 2025. This is also due to the positive interest rate signals from the European Central Bank (ECB). Security is a key motive for buyers and investors to invest in property.
The positive sentiment is partly due to the fact that the ECB has lowered its key interest rates by 25 basis points for the fourth time in a row. With this interest rate decision, it has reached the upper edge of the neutral interest rate zone. "This is in line with the current inflation rate, which is slightly above the ECB's medium-term target of two per cent," says Heiner Herkenhoff, Managing Director of the German Bankers Association. With key interest rates between two and three per cent, monetary policy is considered neutral - it does not dampen demand, but does not stimulate it either.
The amount that property buyers borrow from a bank to buy their own home is also an indication that investing in property provides security in uncertain times. In November 2024, the average loan amount for the purchase of residential property rose again slightly to EUR 314,000 and was only EUR 5,000 below the previous high of EUR 319,000 in December 2021. The initial repayment rate has stabilised at a low level of 1.74%.
Security should always be the top priority when investing money. Despite falling interest rates, call money and fixed-term deposits are also worthwhile. A comparison by Stiftung Warentest shows that the top rates are 3.55 per cent for call money and 3.25 per cent for one-year fixed-term deposits. However: "Fraudulent interest and trading platforms are widespread on the Internet," warns Kathy Elmenthaler, financial expert at Stiftung Warentest.
Looking at the development of mortgage interest rates in 2024, stability is the predominant feature. With a fluctuation range of less than 0.5 per cent, the best interest rate for a ten-year mortgage fluctuated around three per cent over the course of the year. In December 2024, it stood at 2.90 per cent - the lowest rate of the year. The stable interest rate level is being accepted by prospective buyers as the new normal and is therefore also ensuring stable development of the property market.
Photo: © Mailgk1, Pixabay
