Real estate loans: interest rates at their highest level since 2009

Bad news for everyone who dreams of owning their own four walls: Real estate loans in Germany are currently more expensive than they have been since 2009. According to data from the financing broker Interhyp, the average interest rate on ten-year loans has currently reached just under 4.5 percent. This is what Interhyp CEO Jörg Utecht said. This means that the surge in inflation and interest rates triggered by the Iran War affects those interested in owning a home and the construction industry in Germany equally.

In May, the average interest rate was 3.9 percent. According to Interhyp, the previous interest rate high from the end of 2023 has now been exceeded. The last time interest rates were similarly high was during the financial crisis in 2009, as can be seen not only from the Interhyp figures, but also from the Bundesbank's data on housing loans to private households.

The reasons for the recent increase are, in particular, the resurgence of the Iran conflict and the resulting inflation concerns, as Utecht says. As a result, the European Central Bank raised key interest rates to curb inflation. This results in the usual chain reaction to building interest rates. Only when there is a sustainable solution to the Iran conflict will inflationary pressure ease and building interest rates also fall noticeably again, says Utecht. “However, there is currently little indication of this.”

Hundreds of euros in additional costs

Real estate prices have not yet reached their highs from the years before the end of the zero interest rate phase in 2022. But higher interest rates quickly eat up a slightly lower price. For average financing, the recent interest rate increase means almost 200 euros more in monthly payments, says Utecht. “This leads to increased reluctance among some customers.” Nevertheless, prospective buyers still have some leverage in their hands even in the current market phase.

Probably the most important lever is negotiations with the owner. “Many sellers still have the maximum prices from 2021/2022 in their heads,” says Dirk Wohltorf, President of the German Real Estate Association (IVD), the umbrella organization of German real estate agents. The offer prices on the Internet are often still the sellers' desired prices, but are often no longer recorded as high. “If interest rates go up significantly, prices have to come down,” says Wohltorf.