According to the comparison portal Check24, the best possible interest rates for a real estate loan are currently 2.93 percent. This is calculated for financing with a ten-year fixed interest rate. The current value is the lowest level in more than a year. Rates fell sharply, particularly in December. Check24 recorded a decrease of 0.36 percentage points in just one month.
That doesn’t sound like much, but it has a big impact. Anyone who chooses one Buying an apartment If you secure a loan of 300,000 euros, with an annuity of typically six percent of the loan amount, you would still have a remaining debt of 193,000 euros after the fixed interest rate expires. With a loan agreement concluded a month ago with the higher interest rate at the time, it would have been 204,000 euros – so the savings are 11,000 euros, around 5.4 percent. Relatively speaking, these savings remain the same even with other loan amounts.
Check24’s analysis only applies to the best possible financing, i.e. if you have very good credit and can provide good collateral or a lot of equity. The average buyer has to pay even higher interest rates. For ten-year fixed interest rates, the information varies between 3.15 and 3.41 percent, depending on the comparison portal. However, everyone confirms Check24’s statement that interest rates have fallen sharply, particularly in the past few months. The real estate financier Interhyp has recorded a decline of 0.81 percent since November.
That’s why interest rates are falling
The reason for the decline is the weakening inflation in Germany, but especially in the euro zone. In this country it fell from 8.1 percent in December 2022 to 3.7 percent last month. From August to December alone, the inflation rate fell from 6.1 to 3.7 percent. This has two effects: Firstly, potential buyers of possible wage increases have more money in their wallets that they can spend on other things – such as buying real estate. Secondly, it increases the likelihood that the European Central Bank (ECB) could cut key interest rates again this year. This would also have a positive effect on loan interest rates. Many banks that are already offering lower interest rates are simply anticipating this.
This now presents a good opportunity for home buyers, as house prices will also have fallen sharply in 2023. In the third quarter, the decline in residential real estate averaged 10.2 percent compared to the previous year, although this can vary greatly from region to region. There are no figures for the fourth quarter yet. The declines in interest and purchase prices add up for interested parties. A calculation example: A house for 500,000 euros that you would have bought with 20 percent equity a year ago with a loan of 4.2 percent would be paid off after 27 years and interest payments of 304,000 euros. Today the purchase price would be 450,000 euros, the interest rate would be 3.41 percent and the house would be paid off after 22 years and 184,000 euros in interest payments with the same equity investment – home buyers would therefore save five years and 120,000 euros.
This is how it continues
It sounds like now would be an ideal time to buy, but even at 3.4 percent or the best possible 2.93 percent, interest rates are still three times as high as they were around two years ago. At the beginning of 2022, the average real estate interest rate was still 1.0 percent. But things won’t go back to that any time soon. “We expect a sideways movement rather than a sharp fall in interest rates in the next few weeks,” says Check24. This sideways trend could continue for months, as economists do not expect any interest rate cuts from the ECB before April/May – and it is questionable whether a slight interest rate cut would have any impact on the real estate market. After all, the key interest rate at 4.5 percent is now significantly higher than real estate interest rates.
2024-01-10 06:30:02
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