Interest rates for building loans have fallen extremely low – is that it now? Running into building loans?

Have you waited with your house building, and waited and waited, because the interest rates fall ever lower? Then you have probably saved a lot of money so far? But as we explained today: Interest rate hunters are unlikely to notice that they are saving interest on the one hand. But the fact that on the other hand (the longer they wait with their house purchase) they must pay ever higher real estate prices and craftsman costs is probably not considered. Whether it was therefore at all calculated at the end of the day to hope for ever further falling interest rates? That can be calculated probably in the individual case impossibly exactly. But back to the current interest rates.

According to a recent publication by Interhyp (Germany’s largest broker of private residential mortgages according to its own statement), real estate loans were in autumn at a “historically low level”. Interest rates for ten-year loans are often less than one percent, with top providers even less than 0.5 percent. In Interhyp’s monthly trend barometer for building interest rates, the experts from ten banks surveyed forecast a sideways movement in conditions in the medium and long term. Some analysts even expect conditions to fall slightly.

According to Interhyp, many banks have set positive minimum interest rates, and therefore negative interest rates are quite unlikely. So now you’re hitting one of the cheapest providers at around 0.5%? Or will interest rates crash a bit further down if the ECB relaxes its monetary policy again in the coming months? We can’t answer that question either. Interhyp in extracts:

According to Interhyp, the free fall in building loans has been stopped at least for the time being. However, factors such as the unsettled Brexit, trade conflicts and declining economic data mean that a turnaround in interest rates is a long way off. “The ECB wants to fuel the economy and inflation with a bundle of measures consisting of penalty interest rates and bond purchases. Although the central bankers have been relying on a policy of cheap money for years, inflation continues to fall short of expectations,” explains Mohr. This is also reflected in mortgage interest rates, which have reached a historically low level. According to Interhyp, however, the decline in interest rates in July and August was slowed somewhat in September, followed by a small correction of almost 0.1 percentage points in the meantime. Conditions are currently moving sideways at the low level of the record low. “From a financing perspective, prospective real estate buyers do not have to expect a significant increase in the price of their project in the coming weeks and months. In the past forty years, interest rates for construction financing have never been as low as they are today. In October 2019, they are extremely cheap and are even below the all-time low of 2016 – a new all-time low was reached at the end of May 2019 and has been continuously falling below ever since. In October 2016, interest rates for ten-year loans reached their last low. Now interest rates are even lower – more favourable than ever before in the history of the Federal Republic of Germany.

Here are the building interest rates since 2010 for two different financing terms.

red: 5 years ; blue: 10 years

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