DResidential real estate prices in Germany have been rising rapidly for years. Anyone who watches this without a home can only become envious of all those who own property and get richer year after year. But there was a consolation. Interest rate. They have gone down year after year. Those who owned property still had to pay three or four percent of their loans when they bought them, or even more in the past. In 2020 and 2021, it was only 1%. Those who bought late could at least finance it cheaply. This is how everything balances out.
But the times are over. Real estate prices are still high. But their financing is no longer cheap. The European Central Bank is still hesitating in its interest rate hike. But it has long been a reality in the markets. For loans with a term of 20 years, there is often no more 1 in front of the decimal point as was the case in January. In the meantime, the 3 before the comma appears more and more frequently. For a term of ten years, it rose from 0.9 to 2.1% on average – the interest rate more than doubled in three months.
This distorts some calculations. For the first ten years alone, 30,000 euros in interest are added to anyone who takes out a loan of 300,000 euros. Instead of only 20,000 euros in interest, 50,000 euros are due. The dream of owning your own home must therefore be carefully recalculated. The banks reassure that the real estate market in Germany is solidly financed. But those who are ready to buy are already responding with shorter terms and lower repayment rates. In short: your budget is simply limited and you need to increase the risk and postpone interest rate risks and repayment charges into the future.
Interest plays an important role in the calculation of the purchase or lease. If it’s growing as fast as it is now, and building is also getting a lot more expensive, it may make more financial sense to stick with renting. It may not be the dream of a lifetime, but it can save you financial nightmares.