Building interest rates have fallen well below 1 percent again.

This is what the Interhyp portal reports.

In the course of July, the interest on loans with a ten-year term fell by around 0.15 percent to less than 1 percent interest per year, said Interhyp board member Mirjam Mohr.

Christian Siedenbiedel

Editor in business.

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That was a countermovement after building interest rates had risen in the first half of the year.  

In its interest rate comparisons, FMH-Finanzberatung in Frankfurt recently also came up with a decline in the interest rate to an average of 0.81 percent for building loans with a ten-year fixed interest rate.

The consumer platform Biallo currently names an average interest rate of 0.82 percent for such loans.

Consumer advocates point out, however, that the building interest in practice is often slightly higher than the interest advertised in the Internet comparisons.

Among other things, they are also dependent on the borrower's creditworthiness.

The consumer advice centers once set up the rule of thumb that a good 0.15 percentage points should be added to the advertising interest - then you have a reasonably realistic value.

Corona history and the central banks

Interhyp names two reasons for the decline in interest rates: the uncertainty about the further course of the corona crisis and the continued very loose monetary policy of the central banks.

Both have had a lowering effect on the yield on the federal bond with a ten-year term, on which the Pfandbrief interest and thus also the construction interest are based.

There are many different factors that affect bond yields.

Both the European Central Bank (ECB) and the US Federal Reserve (Fed) recently affirmed that they wanted to relax their monetary policy further.

"The reasons for the drop in interest rates on real estate loans are primarily to be found in the course of the pandemic, which continues to have a strong impact on society, the economy and interest rate policy," said Interhyp board member Mohr.

"Increasing uncertainties are leading to falling yields on bonds, which affects building interest rates - the central banks are also continuing to support the low interest rate level."

The German government bond yields, which serve as a “benchmark” for building interest rates, have fallen because investors are increasingly looking for security again, said Mohr.

In addition, with the adjustment of its forward guidance guidelines, i.e. the monetary policy outlook, the ECB has given even more flexibility to supply the markets with liquidity in the future.

Several thousand euros saved

The experts from German banks surveyed for the company's monthly building interest rate trend barometer for the most part assume that interest rates will remain the same over the next few weeks and that building interest rates will rise slightly over the six-month and year-round, reports Interhyp.

The interest rate drop of 0.15 percentage points in July would bring borrowers, in many cases, savings of several thousand euros over a fixed interest rate of ten years.

However, recently bottlenecks and price increases for building materials have made it more difficult for house construction.