The rise in bond yields has massive consequences for property buyers in this country. In the United States, the burden is even higher.
Düsseldorf: Home ownership in a German metropolis is unaffordable for many. Photo: Marcel Kusch/dpa
The interest rates for building financing in Germany are around 4.5 percent with a ten-year fixed interest rate and just under five percent with a 20-year fixed interest rate.
In the US, mortgage rates rose to 7.49 percent for 30-year fixed mortgages, the highest level since November 2023.
The higher financing costs reduce the purchasing power of many buyers and lead to a noticeable shift in demand from the purchase to the rental market, especially in German cities.
The US housing market is suffering from an affordability crisis due to high interest rates and increased house prices, asking prices recently fell slightly and many sellers reduced their prices.
The summary was created and editorially checked using AI.
Frankfurt, Düsseldorf. Many people interested in real estate hoped in vain that financing costs would fall permanently. The current development is going in exactly the opposite direction: recently, interest rates for real estate loans have risen significantly in both Germany and the USA.
This is probably the very factor that is slowing down the tentative recovery trends that had already plunged the industry into crisis in recent years. A look at Germany and the USA illustrates similarities and differences.
In Germany, ten-year building financing now costs significantly more than four percent. Oliver Kohnen, managing director of the financing broker Baufi24, says: “With a ten-year fixed interest rate we are currently at around 4.5 percent, with a 20-year fixed interest rate we are even scratching the five percent mark.”
In the USA, the burden is even greater: interest rates on the most common mortgages are at their highest level in almost three years, making it difficult for many Americans to buy a home.
Germany – project developers are hit hard
The MBA Mortgage Bank Association said Wednesday that the average interest rate on a 30-year fixed-rate mortgage rose to 7.49 percent last week. A higher value was last achieved in November 2023.
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The rise in interest rates comes at an unfavorable time for the German housing market. After the price decline from 2022, prices had stabilized again in many places. But now financing costs are rising again and are making buying housing unaffordable for many people.
A simple calculation shows how big the effect is: Anyone who takes out a loan of 400,000 euros will pay 12,000 euros in interest annually with an interest rate of three percent. At 4.5 percent it is already 18,000 euros, i.e. 500 euros more per month than with an interest rate of three percent. Buyers who cannot bear a higher burden can therefore only finance a lower property price.
Gesa Crockford, managing director of the real estate broker Immoscout24, says: “The higher financing costs are noticeably shifting demand: Particularly in the metropolises, prospective buyers are once again orienting themselves more towards the rental market.”
» Also read: Sentiment is “close to the lows of 2022 and 2023”
The rising interest rates are hitting professional investors even more directly. Because they compete with federal bonds and other fixed-interest investments in their offerings for investors. If their returns increase, real estate must also generate higher returns. If rents remain unchanged, this can primarily be achieved through lower purchase prices.
Nevertheless, the upward trend in the German real estate investment market that has existed since 2025 lost significant momentum in the third quarter of this year. At around 23.9 billion euros, the transaction volume stagnated at the previous year's level after nine months, as figures from JLL show. In the first half of the year, however, the increase was still 15 percent.
Development is particularly problematic for project developers. You often have to finance land purchases and construction costs to a significant extent through external financing. If loan interest rates rise while potential buyers can pay less because of their own financing costs, projects come under pressure from two sides.
USA – Interested parties don’t want and can’t access it
The rise in interest rates is having an even more dramatic impact on the American housing market than in Germany. Not only are the interest rates very high there, but also the house prices. They have increased significantly in the past three years. This year, according to surveys by the National Association of Realtors (NAR), they temporarily reached a record high in the US median.
At the same time, potential buyers can increasingly afford the high interest rates of more than seven percent. The market is stuck: Many buyers cannot or do not want to buy at the current valuations.
Houses in San Francisco: US prices temporarily at a record high. Photo: Bloomberg
Analysts at JP Morgan Chase recently summarized the current development in a study as follows: “The US housing market is confronted with an increasingly deep affordability crisis that is putting real estate ownership out of reach for many customers.”
Now even the price is reacting. At the end of September, the median asking price was $419,000, 1.4 percent below the previous year's value, according to US real estate agent Realtor.com. At the same time, there were 6.3 percent more houses offered on the market compared to the previous year.
» Read also: The mood on the real estate market is gloomy – but offers opportunities for a group of investors
Particularly noteworthy: Sellers had already reduced the price of 20.8 percent of the offers in September - the highest proportion since October 2022.
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GermanyUSAConstruction financing
The American commercial real estate market also remains vulnerable. Many loans that were taken out at significantly lower interest rates need to be refinanced.
Owners of office buildings in particular, which are less desirable, are faced with a double problem: the value of their properties has fallen and at the same time it is more expensive to raise new debt capital.
More: Up to 62 percent cheaper: Where property buyers in the metropolitan areas save the most
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