In recent weeks, the conditions for real estate financing have become significantly more expensive. Experts give no all-clear signal.
New development area in Leipzig: Real estate financing has become more difficult. Photo: Jan Woitas/dpa-Zentralbild/dpa
Düsseldorf. Rising bond yields have pushed mortgage rates significantly above four percent in recent weeks. According to FMH-Finanzberatung, the interest rate for a standard mortgage with a ten-year fixed-interest period stands at 4.29 percent, well above the four percent mark—the highest level since the end of the low-interest rate era, which was previously reached at 4.24 percent at the end of October 2023. At the beginning of July, the average rate still had a three before the decimal point.
"Buyers should prepare for the level to remain above the four percent mark for the time being," says Jörg Utecht, head of Interhyp, Germany's largest mortgage broker.
Among a panel of banks surveyed by Interhyp, 50 percent of bankers expect interest rates to rise further over the next one to two months, while the other 50 percent anticipate sideways movement at the current level.
Yields on long-term government bonds pull mortgage rates upward
Looking ahead to the end of the year, the panel is divided exactly into thirds. Around 33 percent of respondents each expect interest rates to rise, remain stable, or fall again. "This disagreement underscores how much future developments depend on external factors such as inflation and geopolitical tensions," Interhyp notes.
According to Interhyp, one panel participant explains: "The rise in capital market interest rates should push mortgage rates up a bit further in the coming weeks. By the end of the month, however, the realization should grow that the ECB will carry out at most one more rate hike, as inflation will lead to too few second-round effects. As a result, long-term interest rates should ease again slightly."
High energy prices had recently heightened concerns in capital markets about longer-lasting inflation. As a result, yields on long-term government bonds have risen noticeably, which has also pulled mortgage rates upward.
» Read also: "The refinancing gap has become a reality" – is a major wave of bankruptcies threatening the real estate sector?
Mortgage rates are not directly influenced by the level of ECB interest rates, but rather by the development of yields on German government bonds (Bunds). These reflect the general interest rate level in the capital market. As yields rise, the state must therefore grant correspondingly higher fixed interest rates to buyers of newly issued bonds in order to raise money on the bond market.
On Thursday, the European Central Bank raised its key interest rate to 2.5 percent. Oliver Kohnen, Managing Director of the financing broker Baufi24, points out that there is still a need for action by the ECB: "The current step is unlikely to be the last," he says. If price pressure remains persistent, the deposit rate could well rise toward three percent during 2027. "The hope that the inflation surge resulting from the Iran war might quickly vanish has not been fulfilled for now," he says.
For homebuyers, this is not good news at first. Mortgage rates are now frequently above four percent; in some cases, around 4.3 percent is already being quoted for ten-year financing. "This puts them close to the highest level in around 15 years," says Kohnen.
Francesco Fedele, head of BF.direkt, warns that financing costs are also likely to rise further if the inflation surge becomes entrenched. "For borrowers, it therefore remains important to prepare refinancing early and not to rely on interest rates falling significantly again in the short term," he advises property owners.
Marco Schöfl from Qualitypool advises: "Do not speculate on the perfect timing, but hedge your financing against multiple scenarios." Anyone currently planning follow-up financing could secure terms promptly, for example via a forward loan. Longer fixed-interest periods provide additional planning security in this environment.
Related Topics
ECBMortgage FinancingInflation
Anyone counting on interest rates to drop significantly again in a few quarters is taking a considerable risk. Torsten Hollstein, Managing Director of CR Investment Management
The current interest rate trend is also bad news with regard to the real estate industry and professional investors: "The interest rate hike exacerbates the already tense situation in the real estate sector," says Torsten Hollstein, Managing Director of CR Investment Management. Higher financing costs meet significantly lower property values. This reduces potential leverage ratios and creates additional equity requirements. "Especially for upcoming refinancings, negotiations between owners and lenders will thus become even more demanding."
For him, however, looking beyond the current interest rate decision is important. The industry must adjust to the fact that the higher interest rate level is not a temporary phenomenon. "Anyone counting on interest rates to drop significantly again in a few quarters is taking a considerable risk," says Hollstein.
More: When 138,000 apartments become a political football – Vonovia's 23-billion-euro risk
Published according to Handelsblatt's editorial standards. You can find more information in our guidelines.
More on the topic Our partners Advertisement
remind.me Take advantage of the current low in electricity/gas prices before prices rise again
