DResidential property prices in Germany have been rising rapidly for years. Anyone who sees this without a home could only be envious of all those with properties that got richer year after year. But there was one consolation. Interest rates. They have gone down year after year. Those who owned property still had to pay three or four percent on their loans when they bought them, in the past even more. In 2020 and 2021 it was only 1 percent. Those who bought late could at least finance it cheaply. This is how everything balances.
But the times are over. Real estate prices remain high. But its financing is no longer very cheap. The European Central Bank is still hesitating with its turnaround in interest rates. But it has been a reality in the markets for a long time. For loans with a term of 20 years, there is often no longer a 1 in front of the decimal point as there was in January. Meanwhile, the 3 before the comma appears more and more frequently. For a term of ten years, it rose from 0.9 to 2.1 percent on average: the interest rate more than doubled in three months.
This messes up some calculations. Only in the first ten years are 30,000 euros of interest added to those who take out a loan of 300,000 euros. Instead of just €20,000 of interest, €50,000 must be paid. Therefore, the dream of having your own house must be carefully recalculated. The banks assure that the real estate market in Germany is solidly financed. But those willing to buy are already reacting with shorter terms and lower repayment rates. In short: your budget is simply limited and you have to increase risk and postpone interest rate risks and repayment burdens to the future.
Interest plays an important role in calculating the purchase or rental. If it’s ramping up as fast as it is currently, and construction is also getting significantly more expensive, it may make more financial sense to stay on the lease. This may not be the dream of your life, but it can save you from financial nightmares.