Status: 10/17/2022 12:26 p.m
Home loans are increasing at a rapid pace. According to the financing broker Interhyp, the four percent mark should soon be exceeded.
A year ago, building interest was just under one percent. According to data from the financing broker Interhyp, real estate loans have risen by almost four percent to their highest level since 2011. A standard 10-year loan was earning interest at 3.98 percent before the weekend. The Munich company expects that the four percent threshold will soon be exceeded.
“It is unlikely that interest rates will drop noticeably again in the near future,” said Mirjam Mohr, the board member responsible for private customer business. In the coming weeks and months, there will probably be no change in the overall economic situation consisting of increased inflation, the ECB’s tightened monetary policy and high yields on German government bonds. “We therefore expect interest rates to continue to rise moderately.”
Interest burden increases significantly
The rapid increase in real estate interest rates since the beginning of the year has also surprised many experts in the real estate industry – in February the average interest rate for a ten-year loan was just over one percent, in June it was already over three percent. Demand for real estate loans was still high in the first half of the year, but has fallen noticeably since the summer.
The rise in interest rates in recent weeks from 3.5 to four percent can already mean a monthly additional burden of well over 100 euros for buyers. According to the Interhyp sample calculation, the monthly installment for a purchase price of EUR 400,000, equity of EUR 50,000, repayment of two percent and an interest rate of 3.5 percent is EUR 1705. With an interest rate of 4 percent, it is already 1860 euros.
Financial intermediary Hypoport suffers
The slump in demand on the real estate market is having a massive impact on new business at the financial broker Hypoport from Lübeck. The transaction volume on the Europace credit platform shrank in the third quarter – mainly due to a decline in real estate financing – by 18 percent to 19.8 billion euros, as the company listed in the SDAX small-cap index announced today in Berlin.
The financial sales Dr. Klein brokered only 7.8 billion euros in the summer quarter, which corresponds to a minus of 23 percent. The demand for real estate loans is very weak for both private customers and professionals. Hypoport had already overturned its forecast for the current year in September in view of the downward trend.
Demand for real estate loans falls
“The German residential real estate market has not experienced such a slowdown in the last 25 years,” summarized Hypoport CEO Ronald Slabke. The price expectations of buyers and sellers have diverged widely for several weeks. This not only meant that it took longer for real estate to find a new owner, but that buyers withdrew completely. This is due to the sharp rise in interest rates, inflation and fears of recession and the hope that real estate prices will continue to fall.
Banks and savings banks have also been reporting significantly lower demand for real estate loans for weeks. Hypoport shares have fallen by 85 percent since the beginning of November 2021. Today it fell by 1.2 percent to 83.75 euros.
Real estate prices are falling
In some cities, the higher construction interest rates and the increasing uncertainty on the market have already led to a leveling off in price increases or falling prices. According to an analysis by Interhyp, real estate prices in Leipzig fell by 7.2 percent in the second quarter compared to the first three months, by 6.9 percent in Cologne and by one percent in Berlin. On average, however, prices fell less sharply in the second quarter, by 0.9 percent. According to Interhyp, prices have risen by almost 85 percent since 2012.