Arent Bolte, Marcel Sluppke and Dennis Grünert on rising interest rates, concerned builders and the prospects.
The looming turnaround in interest rates brought about by the European Central Bank surprised many. This is confirmed by Arent Bolte and Marcel Sluppke, the two heads for private and corporate customers in the Haspa region Hamburg Süd, as well as the “product owner facility” Dennis Grünert in an interview with B&P. The topic: the current situation on the interest rate front and the possible consequences for builders, who in the past few years felt like they were able to take out loans for free, but now have to reckon with significantly higher burdens as the terms gradually come to an end. Haspa would not be Haspa if it had not taken the case into account. Arent Bolte: “Of course, we built in a buffer when we took out loans, but to be honest, it’s limited.”
Before the start of the Russian attack on Ukraine, there seemed no end in sight to the easy money phase, but then things got out of hand and Germany has been experiencing unusually high inflation for a long time. Marcel Sluppke: “Interest rates were just historically low, but now we’re suddenly at over three percent.” Incidentally, the movement applies to both loans and investments, but is currently only affecting the long-term sector. Arent Bolte: “For a borrower who has to pay off his house and has received very favorable conditions, that can mean a doubling of the monthly burden.” Topic, but now the leap to three percent – that’s really neat.”
Higher monthly rate despite repayment. . .
Older students who took out a mortgage in the 1990s remember very different times. At that time, interest rates of eight, nine and more percent were common – seen from this point of view, the three percent mark is still moderate. However, not if the property costs 500,000 euros and the monthly rate increases from 1,250 euros to more than 2,000 euros, as Arent Bolte calculates roughly on the flip chart. The crazy thing: It can happen that after the term of a cheap loan has expired, an amount has been repaid, but the remaining debt weighs more heavily than at the beginning of the financing due to the interest rate increase. In short: Despite the lower residual debt, the connection rate can be higher.
Dennis Grünert is the man for the other side – that of the systems. At Haspa this is now called a “customer journey investment” because before anyone invests their money, they have to consult a specialist in depth. He says: “Strictly speaking, the first impulses for an interest rate hike already existed before the Ukraine war, because during the pandemic the first signs of inflation were already emerging due to the disrupted supply chains and the increase in the cost of transport. The Ukraine crisis can be seen as an accelerator of this development. The US Federal Reserve already tightened interest rates in March, which had a negative impact on demand for loans. With the perspective and the Bafin announcement to increase risk protection, an increase in interest rates is programmed.”
Three percent – was that it?
The Haspa experts consider a further increase in interest rates in the sense of a renewed doubling on long-term loans to be rather unlikely. Dennis Grünert: “We believe that interest rates on the long-term investment side will remain stable because the ECB’s monetary control measures are likely to have already been priced in.” He only expects a marginal impact on short-term interest rates, for example on savings accounts and call money accounts: with the end of negative interest rates, but otherwise it will be close to zero. Short-term savings investments will remain rather unattractive for the foreseeable future.” And he says: “You could now buy fixed-interest securities in a targeted manner, but the overall increase in yields that can be expected will not be sufficient to achieve a positive yield in real terms.” Haspa expects an average inflation rate of in 2022
6.5 percent. If you want to compensate for inflation losses, you can’t avoid stocks in the long term. And further: “The best way to do this is through a fund savings plan. Haspa offers them from a monthly investment of 25 euros.”
The Haspa experts are cautious about whether construction financing is now coming under pressure in view of the rising interest rates. Arent Bolte: “We have always looked at whether a home buyer is also able to cope with five percent repayment and interest. But now these five percent have been reached. In individual cases, it could become tight if the financing is extended. Marcel Sluppke: “Anyone who is worried should contact their advisor in good time to take countermeasures. Then we will find a solution together.”
To take away some of the concern: “Anyone who bought five years ago has also formed a hidden reserve – the real estate has increased in value immensely during this time,” says Dennis Grünert. Which applies in particular to the surrounding area, as Arent Bolte emphasizes. Grünert continues: “Rising interest rates are always bad for the market, but so is high inflation today
the breeding ground for long-term increases in real estate prices.” wb
>> Web: www.haspa.de
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