Interest rates for real estate loans have climbed to a new high for the year.

"Driven by inflation, tightened monetary policy and the high yields on German government bonds, interest rates for building loans with a ten-year fixed interest rate already exceeded the 3.5 percent mark at the end of September," said Mirjam Mohr, board member of the credit broker Interhyp.

The interest rate for loans with a ten-year fixed interest rate is currently 3.8 percent.

Trend reversal in interest rates unlikely

Christian Siedenbiedel

Editor in Business.

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Even if there could be temporary fluctuations and declines in conditions after the strong increase - according to Interhyp, a trend reversal is currently unlikely.

Because despite the economic slowdown, the central banks wanted to maintain a high rate of interest rate hikes in autumn and winter.

"Even if some of the expected key interest rate hikes have already been priced in, property buyers must continue to expect slightly higher building interest rates," said Mohr.

However, downward fluctuations are possible.

In addition, adjustments to conditions are often priced in at different speeds by the banks, so comparing offers in a volatile environment is worthwhile.

According to the company, the experts who are regularly surveyed for the Interhyp construction rate trend barometer also see rising interest rates over the course of the first six months to a year.

By the end of the year, the majority expect building interest to be around 4 percent.

A year ago building interest was still at 1 percent

According to Interhyp, ten-year real estate loans cost more than 3.5 percent today, more than three times as much as exactly a year ago, when an average of one percent was due.

"That's a big rate hike in a relatively short period of time," Mohr said.

In order to classify the current interest rate level, it is also advisable to take a look at the past, said the mortgage expert: “A good ten years ago, interest rates for ten-year real estate loans were also between three and four percent, 15 years ago around five percent.” However, they are also Real estate prices and thus the required loan amounts were even lower at that time.

Interhyp believes that the monetary policy of the most important central banks, which is aimed at combating inflation, will continue to determine the development of construction loans in the autumn.

After the European Central Bank (ECB) raised the key interest rate in two steps from zero to 1.25 percent this year, the next significant interest rate hike could follow at the end of October.

ECB President Christine Lagarde had hinted at this several times.

Despite the negative impact on the economy, the American Federal Reserve (Fed) also intends to further tighten monetary policy and raise the key interest rate.

"In view of the sometimes double-digit inflation rates, the central bankers must continue to exploit their leeway," said Mohr.

"However, since the economy is being burdened, there are limits to the interest rate level - this should keep building interest rates in check despite the existing upside potential."