“Increased financing costs and living costs are currently leading to the fact that it may not be possible to fulfill every financing request” – With these flowery words, the Tagesschau quotes a spokesman for Commerzbank on the rising construction interest rates from a dpa survey.
Economist Ludwig Dorffmeister from the Munich ifo Institute is less gentle in his comments to the Süddeutsche Zeitung: “Those interested parties who could only afford to buy real estate in recent years because of the extremely low interest rates are now falling out of the market.”
Creditworthiness for real estate financing more difficult to achieve
The background to this development, in addition to higher construction costs and the increase in the key interest rate by the ECB, is the high rate of inflation. A spokesman for Deutsche Bank explains according to Tagesschau: “Due to the sharp rise in inflation, driven in particular by high energy prices, we had to adjust our minimum requirements for living and management costs as part of the credit rating upwards.” For example, buyers would have to bring more equity with them . According to Tagesschau, data from Interhyp shows that the average equity required for a loan in the first half of 2022 was EUR 159,000, exactly EUR 30,000 more than in the same period last year.
Nevertheless, according to the large credit institutions, the number of rejected loans has hardly fallen. Ingo Foitzik, Managing Director of CHECK24, contradicts this – the numbers would differ from financial institution to financial institution. As the Süddeutsche Zeitung reports, for example, fewer loans were taken out at Postbank Immobilien than in the previous year.
Mortgage rates have tripled since the beginning of the year
Other institutions, on the other hand, recorded significantly more lending, particularly in the months from January to April. The Süddeutsche Zeitung quoted Mirjam Mohr from the Interhyp board of directors as early as May of this year: “Many of our customers are worried: They see rising interest rates and feel pressure to secure cheap interest rates quickly.” Landesbausparkasse (LBS) Bavaria committed 890 million euros in loans – a full 70 percent more than in the same period last year. Growth at LBS West (North Rhine-Westphalia and Bremen) is 50 percent.
For those who took this step in time, it was probably the right decision: building interest rates have tripled since the beginning of the year. After a brief drop in the summer, they have climbed back to around three percent for ten-year fixed interest rates since mid-August. This level was last reached in 2012. It will remain so for the time being. Since interest rates “have not risen as sharply as in the first half of the year, experts do not see an increase to 4 percent, but rather expect interest rates of up to 3.5 percent,” Interhyp predicts.
However, it is obviously difficult to predict whether construction interest rates will fall again next year or remain at the high level. Lower interest rates would give more prospective buyers the opportunity to buy or build a house again.
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