Mortgage rates in Germany have risen to their highest level since 2009, according to data from mortgage broker “Interhip“, cited by DPA. The average interest rate on home loans with a fixed term of 10 years has reached around 4.5%, up from 3.9% in May.
The new level is above the previous peak of around 4.4%, reported at the end of 2023. Thus, mortgage loan costs are once again at levels not seen since the financial crisis. The figures are for average market conditions, with the specific interest rate depending on the bank, the loan amount and the borrower's financial profile.
Inflation concerns weigh on the market
Interhip CEO Jörg Utecht attributes the latest rise mainly to renewed tensions over the conflict with Iran and concerns that it will keep inflation high. The European Central Bank has also raised interest rates in an attempt to limit inflationary pressures.
“Interest rates are unlikely to fall significantly before a lasting solution to the conflict with Iran is found. There are currently few signs that this will happen,“ Utecht said.
Higher financing costs are having a direct impact on households. According to Utecht, the latest increase adds nearly 200 euros to the usual monthly mortgage payment and is causing some potential buyers to postpone their decisions.
Cheaper homes do not compensate for expensive credit
Property prices in Germany remain below their peak levels before the start of the interest rate hike in 2022. However, the decrease in price is not enough to compensate for the more expensive credit. Higher interest rates can quickly erase the benefit of the lower purchase price.
According to the president of the German Real Estate Association, Dirk Wolltorf, buyers can still negotiate lower prices. According to him, many sellers still expect properties to return to the levels of 2021 and 2022.
The pressure is also being felt in construction. A regional association of construction companies in Bavaria reports that many companies have few remaining orders for the completion of residential projects. The organization also warns of a further decline in the number of completed homes this year.
Detailed statistics on average property prices in Bulgaria by city and neighborhood can be found at imot.bg