Installment loans for consumers are now available in Germany at negative real interest rates.

In other words, the interest consumers have to pay on loans are lower than the recent sharp rise in inflation.

If you borrow money, you don't have to pay for it, but make a plus, at least if you take into account the loss of purchasing power of debt due to inflation.

This is the result of an investigation by the Internet platform Verivox, which the FAZ has exclusively.

Christian Siedenbiedel

Editor in business.

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Accordingly, the mean interest rate for all installment loans brokered via the platform in July was 2.99 percent.

In view of an inflation of 3.8 percent, the corresponding formula results in a negative real interest rate of 0.78 percent, writes Verivox.

This is a new development, since the inflation rate only rose above the 3 percent mark in July.

Monthly inflation rates in Germany were still negative at the end of 2020 - prices had fallen on average.

No marketing gimmick this time

Negative real interest rates are a positive consequence of low interest rates and high inflation for indebted consumers.

As a rule, the negative consequences of both circumstances for the savings of savers are in the foreground.

In the course of the low interest rate phase, there were a few installment loans with negative nominal interest rates. Three years ago, the Internet portals Smava, Check24 and Finanzcheck were in a race to find who could offer installment loans at the lowest possible interest rates. That went down to minus 20 percent. However, it was more of a marketing measure. The loans were each limited to a fairly manageable sum, around 1,000 euros, and by no means all those interested had received them at these extremely low nominal interest rates.

Now it is a question of the average interest rates on the loans actually disbursed in July.

These are not interest rates subsidized from marketing budgets.

Rather, it's just that the monthly rate of inflation exceeds market rates.

“In the coming months, the real interest rate could slide even deeper into the red,” writes Verivox.

It is expected that the inflation rate in Germany will continue to rise.

The Bundesbank is assuming that the rates will move "in the direction of 5 percent" towards the end of the year.

All other things being equal, that would drive real interest rates deeper into negative territory.

Future inflation is crucial

All this has been around for a long time for building interest. At least the banks' advertising interest in the Internet tables fell below the 1 percent mark in July, as reported by the credit broker Interhyp. This means that the interest rate should even be below what the European Central Bank expects in terms of inflation for the full year 2021 in the euro zone. The forecast is currently 1.9 percent, but could possibly also be increased. The Bundesbank expects an average of 2.6 percent for Germany this year. So the building interest should definitely be below that - even if consumer advocates warn that the building interest in practice is often a bit higher than the advertising interest of the banks on the Internet.

So can consumers now go into debt and hope that inflation will take some of the burden off the credit over the life of the loan? The catch with this calculation is that you don't know future inflation. The European Central Bank considers many of the phenomena that are currently driving inflation to be temporary. For the next year, she predicts inflation of 1.5 percent. If that happens, the calculation with the negative real interest rates for installment loans would no longer work out - with construction loans, on the other hand, you might still have a chance.

However, there is a dispute among economists as to whether inflation really only rises for a short time and then falls again, or whether higher inflation can also be expected in the longer term. Should the latter happen, consumers could benefit, especially with longer-term loans. These are, for example, home loans that run for ten or 15 years. Installment loans, on the other hand, are usually granted for shorter terms, for example twelve months. For them, the current inflation trend could be more relevant.

Verivox has calculated an example: Anyone who took out a loan of 15,000 euros in July at an average interest rate of 2.99 percent pays 16,152 euros back to the bank with a term of five years. However, given constant inflation, this sum would only have a value of EUR 13,404 at the end of the term. Measured against today's purchasing power, borrowers would repay around 1,600 euros less than they received.

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