07/17/2022 06:59 am –
Mortgage rates have risen sharply since the beginning of this year. If the trend continues, interest rates on loans will continue to rise this year. What you should know so that your finances for your construction project add up: We provide answers to the most important questions.
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Are you toying with the idea of buying a condo or house? Or have you already financed a property and the fixed interest rate Is your loan coming to an end? Then you probably noticed it long ago: You have to come with us now higher lending rates calculate.
Currently, the APR for ten-year mortgage loans is included 2,60 %. At the end of last year there were still below 1% been. The past few months have seen the strongest increase since the turn of the millennium. The building interest rates are still a long way from the previously usual levels of 4%, 5% or even 6%, but now the times of historically low building interest rates seem to be over, at least temporarily.
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Own property is the most important part of your own retirement provision. Rent-free living saves money in the long run. For most people, building or buying a single family home or condo is the largest investment of their life. Find out in our current guide to mortgage lending how expensive your property can be and which banks or providers are suitable for your home loan. → table of contents → Excerpt (PDF)
→ Shop: Guide to real estate financing: tips for building financing, house and apartment purchases |
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How will interest rates develop in the future?
The experts agree: interest rates should continue to rise. However, in the past few months, any forecast has very quickly been outdated. The interest premiums came much faster and were significantly higher than forecast. At the beginning of the year, for example, banks were still talking about interest rates of a maximum of 2% by the end of the year. Some banks are now charging just over 3% for ten-year home loans.
A calculation by the Real estate portal Immowelt using the example of an 80 m2 large existing apartment in Munich. An interest rate of 1,38 % in January and 3,05 % in April.
The result: With an average asking price of currently €766,000 for the domicile in the Isar metropolis, an annual repayment rate of 2%, a ten-year credit period and 95% financing of the property, the monthly rate at the beginning of the year was around 2.050,– €. After the rise in interest rates, apartment buyers in Munich are now paying 3.060,– € per month, i.e. almost 50% more.
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Why have interest rates risen so quickly?
How high or low the interest rates for construction loans are depends not least on the inflation rate away. According to the Federal Statistical Office, this is provisional 7,9 % climbed. The rate of inflation in Germany was last similarly high in the winter of 1973/1974, when mineral oil prices also rose sharply as a result of the first oil crisis.
However, higher inflation rates always contribute to the Bund yields and attract mortgage bonds. The ten-year federal bond, with which buyers lend money to the federal government, recently had a yield of already 1,75 % away. Last year, the return was still negative. However, if interest rates on the capital market rise, it becomes more expensive for financial institutions to finance the issue of their mortgage loans. This in turn makes construction loans more expensive.
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How are builders reacting to rising interest rates on loans?
Borrowers are doing the right thing. They are trying to secure the interest rates, which are still low in a long-term historical comparison, for as long as possible. An evaluation by the credit broker Interhyp shows that building loans from owner-occupiers now have one average fixed interest rate from 13.9 years.
Many now take out loans over 15 years so that they have already paid off a large part of the purchase price after the fixed interest period has expired.
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What should prospective buyers not do?
So far, the basic rule has been: Do not accept the first best loan offer from the house bank, but compare conditions and negotiate. This is especially true now, because the interest rate differentials have rarely been so large.
Die Stiftung Warentest recently compared various offers. The case: Customers need a loan of €320,000 to buy a €400,000 condominium. One is chosen full repayment loan over 30 years, i.e. the loan should be paid off in full after 30 years. The result: The cheapest and the most expensive loan offer almost gape in this case two percentage points apart.
A bank demanded a whopping amount for the full repayment loan with a term of 30 years 3,38 %, another only 1,43 %. The bottom line is that borrowers have to go to the cheapest provider 1.090,– € pay per month, the most expensive are 1.403,– € in the month. Over 30 years, the difference adds up to an incredible amount 112.540,– €, who have to pay more.
Now comes the aggravating one Time pressure from the rise in interest rates added. Perhaps you are now inclined to act very quickly in order to secure the relatively low interest rates. But remember: rushing to finance is never a good thing. Even more important than paying a tenth or two less in interest is that the property and financing fit your life now and in the future and don’t overwhelm you financially.
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Follow-up financing: Why is it so important now?
If you have already taken out financing, you should pay attention to two details in order not to pay extra:
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If you have taken out a loan with a term of 15 or 20 years, for example, you can cancel it after ten years because you have a special right of termination. You can then do without a notice period of six months prepayment penalty, i.e. switch to another lender without having to reimburse the bank for the lost interest income. This is regulated in § 489 of the German Civil Code (BGB).
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You can use an advance loan, i.e. a forward loan, secure the follow-up loan years in advance and thus secure the favorable interest rates for loans that are only due in one, two or three years.
However, surveys show that many customers know too little about forward loans. And almost half of those surveyed don’t even know that special right of termination.
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What should be considered with a forward loan?
You can maximum five years in advance to lock. Forward loans are structured like traditional mortgage loans, where customers pay interest with their monthly installments and gradually repay their loan.
For the advance loan is though an interest rate premium due. Depending on the provider, this can be 0.01% to 0.05% per month.
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Why Forward Loans Can Be Attractive to You Right Now?
Two reasons speak at the moment for the conclusion of a forward loan. Firstly, the current interest rate is still well below historical averages, and secondly, it looks like loan rates will continue to rise.
It was different in the past ten years: it was hardly worth paying the premium for the advance loan because interest rates first fell for a long time and then remained fairly stable at this low level.
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How Much Can You Save With a Forward Loan?
For example, if the mortgage interest rate increases by two percentage points compared to the first loan, a follow-up loan of around €150,000 will increase 250,– € per month more expensive. In ten years, this adds up to additional costs of €30,000. Despite the interest premium, you can save a lot of money with a forward loan. But be careful, the motto also applies here: calculate meticulously.
If the provider charges an interest surcharge of 0.04% per month and the follow-up loan does not begin for four years, the interest surcharge already adds up to 1.92% if the surcharge is payable immediately from the first month. To borrow €150,000 in this way would be fine 225,– € cost more per month. It’s hardly worth the effort.
According to research by consumer portal Biallo However, some providers waive the interest surcharges, for example Debeka, Allianz or Bank Santander for up to one year, other providers six months.
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How critical are prospective buyers now of the real estate market?
Many people already have the feeling that they can no longer afford their own property. They refer to the purchase prices for houses and condos as overheated and decoupled from true intrinsic value. This is the result of an online survey by the credit broker Interhyp. 77% even believe that there is a real estate bubble in Germany.
Die Federal Bank recently again warned against overprices in one of its monthly reports and wrote: “According to the latest estimates, real estate prices in cities in 2021 were between 15% and 40% above the price indicated by socio-demographic and economic fundamentals”.
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What are the long-term consequences of rising interest rates?
Buyers are already taking on more and more debt because construction and real estate prices continue to rise. According to Interhyp, the average monthly rate paid to banks has increased from €1,070 in 2020 to €1,150 in 2021.
For more and more people wanting to build, the question is therefore: Can I still afford the financing at all?
When financing, only charge yourself a monthly interest and repayment burden that you can handle permanently. Also consider whether you should protect yourself and your family with term life insurance.
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