Building interest rates in Germany have been rising again since the beginning of the year: Consumers now pay an average of around 1 percent effective annual interest for a building loan with a ten-year fixed interest rate, according to the index of the consumer portal Biallo.

In January, the highest level since June 2019 was reached.

During the corona pandemic, interest rates fluctuated well below this limit at times, at times even amounting to just 0.65 percent.

For loans with a 20-year fixed interest rate, the average interest rate is now 1.44 percent.

Christian Siedenbiedel

Editor in Business.

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The parallel to the high yields on federal bonds is no coincidence: mortgage interest rates are closely linked to mortgage bond interest rates in banks' mortgage lending. These, in turn, develop parallel to the yield on federal bonds. Rising bond yields therefore usually lead to higher building interest rates. A rough rule of thumb says: The interest rate for a loan with a term of ten years is the yield on the ten-year federal bond – plus 1 percent.

A further increase in interest rates is likely to be expected in the coming months. Anyone who is thinking about building right now should certainly not make a hasty decision, but could pay a little more for the loan in a few months. Max Herbst from FMH-Finanzberatung, who continuously monitors consumer interest rates, anticipates that the interest rates for a building loan with a ten-year fixed interest rate will rise to between 1.5 and 1.75 percent over the course of the year. Mirjam Mohr, board member of the credit broker Interhyp, also says: "We expect a noticeable increase in construction interest in the range of several tenths of a percentage point." In a historical comparison, the construction interest remained low: "Ten years ago, interest rates of more than 3 percent were common."

Herbst calls the higher inflation as an argument for rising construction interest rates: At least the American central bank is already openly talking about an interest rate hike: "At the latest when these words are followed by deeds, it can be assumed that construction interest rates will also rise significantly here." A second The argument is the decision by the supervisory authorities in Germany to increase the banks' capital buffer for real estate loans, which is intended to prevent the real estate market from overheating. From February 2023 onwards, many institutions would have to increase their equity. Experience has shown that this results in – slight – interest rate increases for borrowers. "Although the Bafin requirements do not affect all banks equally," says Herbst: "Nevertheless, it is conceivablethat financial institutions with a sufficient capital buffer also seize the moment and also raise their interest rates and thus their margins.”