Building interest rates for property buyers are falling to below three percent - experts see relaxed inflation as the cause

Building interest rates for property buyers are falling to below three percent - experts see relaxed inflation as the cause

According to a report by www.tagesschau.de The building interest rates for property buyers with very good credit have fallen below the three percent mark. According to an analysis by the comparison portal Check24, the best interest rates for ten-year building financing at the beginning of the year were 2.93 percent, 0.36 percentage points lower than in December 2023. The lower yields for ten-year federal bonds and the easing inflation are the decisive factors for this, as this leads to falling building interest rates.

Thanks to the lower interest rates, property buyers can save a lot of money: with a building financing of 400,000 euros and the best interest rate of 2.93 percent annually, interest costs amount to 104,569 euros until the end of the ten-year fixed interest rate. The monthly rate in this case is 1,643 euros. Compared to an interest rate of 3.29 percent at the beginning of December, buyers saved 12,673 euros in interest costs with a monthly rate that was 120 euros lower.

There are great expectations on the capital market that the central banks will cut key interest rates in 2024 if inflation falls. Despite an inflation rate in the euro zone of 2.9 percent in December 2023, inflation has tended to weaken. The yields on ten-year federal bonds have fallen sharply, which has led to a fall in building interest rates of around 0.8 percentage points since the end of October.

But the trend of sharply falling building interest rates is unlikely to continue. Experts expect a sideways movement rather than a sharp fall in interest rates in the next few weeks. Economists at Deutsche Bank are predicting building interest rates will rise again over the course of the year, as inflation in Germany is expected to remain above two percent. By the end of 2024, five- to 10-year mortgage rates are expected to rise again to 3.8 percent. This increase in building interest rates could have far-reaching effects on the real estate market and the financial sector. Savings potential for property buyers is expected to decrease, which could impact demand for properties and the dynamics of the property market. As a result, activities in the construction financing and mortgage markets could also be affected.