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.