Many are currently realizing the dream of their own four walls

Many are currently realizing the dream of their own four walls

That makes sense – because never were loans as cheap as now. Usually, the fixed interest rate ends after ten years.


Picture: Family in front of home 

For an average of just two percent, there is a real estate loan with a ten-year term – half as expensive as ten years ago. There would have to be a few square meters more in it, a house in a better location, a nicer bathroom, a bigger garden, in short: a little more luxury. But those who think so and because of the favorable conditions now burdened with higher debt, may sit on a time bomb.

Large part of real estate loans expire in ten years

That could go up in about ten years. Then a large part of the real estate loans expire, the buyers have recently concluded with low interest rates. In the case of private households, the Bundesbank counted on residential construction loans worth around one trillion euros last November. Nearly three-quarters of new loans completed this month have fixed interest rates for more than five years. Ten years are standard. Then thousands of home builders and buyers need follow-up financing.

“That carries a certain risk, because the interest in ten years, probably higher,” warns the real estate economist of the Institute of German Economics, Michael Voigtländer. In other European countries overindebted crises have emerged. Do the German consumers have to fear that too?

Conservative mentality benefits the Germans

No, says Voigtländer. The Germans will benefit from their conservative mentality. “They finance their property with relatively much equity,” the scientist knows. Borrowers in this country borrow only about 75 percent of the construction or purchase price. In the Netherlands, on the other hand, loans over 120 percent were normal before the real estate crisis.

At the same time more and more is paid off. According to Voigtländer, the rates are now no longer one, but 2.5 percent. “Many even repay with three percent and keep the burden at first neat,” says Christian Walburg from the Association of German Pfandbrief banks. Unlike in the UK, where, despite low interest rates, it has not been paid off for a long time – and the owners have drifted ever deeper into the interest rate trap.

“It is usually not advised and sold as it would be useful”

In Germany, the banks did not allow this at all, says Helmut Weigt of the association Wohneigentum in Bonn. “Some institutions even require repayment installments of two to three percent, otherwise the customer will not get a loan.” The banks have an interest in secure financing, emphasizes the spokeswoman for the Landesbausparkassen, Ivonn Kappel. Therefore, they advised themselves to appropriate eradication.

But borrowers should not trust it, advise the consumer centers. “It is usually not as advised and sold, as would be useful,” warns real estate expert Niels Nauhauser of the Consumer Council Baden-Württemberg. The banks are not only interested in a high margin, but also in low default risks. Currently, however, they also advised to pay instead of repayment in a home savings contract. Thus, consumers bought their long-term fixed rate much too expensive.


With the crisis, promotional credit offers are multiplying

Competition and banking supervisory authorities are monitoring the phenomenon. Consumer associations warn against sometimes misleading advertising.

In the last few weeks, enticing and tempting ads have been flooding newspaper pages, websites and personal e-mail. While the financial crisis is raging, these advertisements offer loans Get Index 90 at will renewable or credit buybacks of all kinds, automobile, housing or consumption. They promise citizens-consumers restored purchasing power at the same time … a better life!

“It’s time to take advantage of it!” Says an advertisement for Credito, the “specialist in the redemption of credits, which gives color to your life”. “Click here” to “collect all your credits” and “unlock your purchasing power!” continues the message to households strangled by their reimbursement charges.

Consumers who struggle to make ends meet, and are reluctant to push the door of their bank, other financial companies offer “money reserves” available “right now”, and, they suggest, for nothing or almost. Thus, this advertising signed “Médiatis, the credit that has the sense of service”, puts at your fingertips “a reserve of money up to 10 000 euros to achieve your projects”, with “0 euro to repay for three months, and immediate principle answer!”. As a cherry on the cake, Médiatis, which, lucky enough, “celebrates its 10th anniversary”, offers “an exceptional rate on your credit reserve for 6 months”.

“Relax and do not start repaying until 2009,” says another commercial for a revolving credit called “Disponis, credit according to you”, showing a languid woman on a beach bathed in sunshine. It offers up to 4,500 euros “transferred in 48 hours only”, for “0 euro for 3 months” with, as a gift, a mini-Hi-fi.


The upsurge in promotional credit offers is a classic phenomenon in times of crisis. It is closely monitored by competition authorities, banking supervisory authorities and consumer associations, who denounce misleading messages and inducements for excessive indebtedness.

“All is not bad and it can happen that good buy-backs and debts by serious people allow families to avoid being evicted from housing or falling into debt,” explains Frédérique Pfrunder, Project Manager at the Consumption, Housing and Living Environment Association (CLCV).

But, she warns, “you have to pay attention to very aggressive ads where you do not talk about money but where you sell well-being. The credit conditions behind it can be dangerous, for example, if We propose a variable rate to indebted households at a fixed rate. It must be kept in mind that, in any case, the new credit will be longer and will cost much more!

Ms. Pfrunder denounces the passage “double jackpot” that represent, for banks, these operations of the repurchase of receivables. She also warns against the temptation of revolving credit, while threatens the economic crisis. “We are in the process of setting up an explosive device,” she says, ” there are no longer any small loans earmarked to finance expenses of less than 2,000 euros, such as the purchase of a washing machine. offers revolving credits that can be used at will on bank cards. ”

Christian Huard, president of CondoFrance, shares these concerns. He expects credit institutions to adopt responsible behavior. “The vultures of the crisis are, it seems, already there,” says Huard, ” By offering credits at promotional rates, these companies distort the economic offer. There must be a price for credit. ‘essential is the normal price, the one we will actually pay throughout the loan term.’ For Mr. Huard, it is up to the government to protect the consumer from unfair practices, especially when the state enters the capital of banks.

Mannheim – At home my money is better off than at the bank. This was apparently the opinion of a 91-year-old retiree from Mannheim, who had deposited his savings of 40,000 in his apartment.


Image: Coins and bills 

But a thief got after police access to the apartment and took the full cashbox. The savings were gone. The senior is not the only one in Germany who prefers to keep his money at home rather than entrust it to a bank.

Illusion of control

“Many people want to be able to touch and see their money, and they have the illusion that they have more control,” says Bamberger Professor of Finance Andreas Oehler. “Some think:

If there is almost no interest, anyway, I can also put my money under my pillow. “And that, although it is much faster away there than on the bank.Here at the place of hiding the imagination knows no bounds in the freezer as under the pillow.

There is no interest on cash

According to the Bundesbank, anyone who hoards cash loses money in particular: escaped interest – albeit low -, the costs of a locker or possible theft. But in times of high uncertainty, many people wanted to be able to access their finances quickly – and cash was the fastest available.

During the financial crisis in October 2008, for example, demand for it had risen sharply. Especially noticeable many 500-euro notes were sought after. In the crisis year of 2009, the Bundesbank assumed that the Germans hoarded up to 65 percent of the circulating cash. How high the proportion is at present, there are no estimates. Oehler does not consider interviews to be reliable on this subject: “Who says the truth when, for example, he hides money at home for unfair reasons?”

Fear of negative interest

The Federal Association of German Banks currently sees no signs that the Germans hoard a lot of cash. But that could change from the perspective of some experts. The reason: the discussion about negative interest rates, so if bank customers have to pay penalty interest if they invest larger sums. With the deposits of the savers is because of the low interest on the capital market hardly to earn money. So far, individual banks charge negative interest rates for major customers.

“If banks actually start to introduce negative interest rates for ordinary savers, then I think it is a probable scenario that people start to withdraw their money and deposit it at home or in the locker,” says financial market expert Dorothea Schäfer from the German Institute for Economic Research (DIW) in Berlin. “That’s why I’m amazed how lightheartedly banks talk about it.”

Worry about bank instability in Germany unfounded

Those who did not prefer to leave their money to the banks at the height of the global financial crisis were probably worried about the stability of the bank, as Schäfer says. This fear has taken a back seat in Germany today. “It has been experienced that ultimately you do not have to worry.”

Economist Michael Feigl from the Institute for Financial Services in Hamburg appeals to common sense. “I always hope that people are reasonable and do not hoard large sums of money at home,” he says. After all, the burglary figures are high.

Home-based money drives investment in security

Finance expert Friedrich Heinemann of the Center for European Economic Research (ZEW) in Mannheim points out: “Bunkering at home is also expensive, you would have to invest in security and buy safes, and the insurance premium on cash at home is also there a kind of negative interest. “


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An Interest Rate Manual – Pay Your Expenses On Money Supply Raises And Inflation

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