Real Estate: Small interest rate, high risk

The Mini interest rates entice a home purchase because loans are cheaper than ever. But beware: The interest rates will rise. Then facing a funding nightmare.

Some bills seem at first glance so good that you wonder inevitably where the hook is. For example, in this calculation of a mortgage platform: For only 0.75 percent interest a dream come true, is there, the dream of owning a home that is.

A freelance writer in the economy of the Frankfurter Allgemeine Sonntagszeitung.

The least entertain nearly four out of five Germans, and for this very sensational tiny borrowing rate, she would get a home loan of 150,000 euros and only paid a rate of 343 euros on a monthly basis for ten years. Finish is funding. Because once one says it is difficult to get this country on homeownership. More and more people dare and buy a house or apartment.

No wonder, then, that the number of real estate loans is rising like crazy. In some months of last year, the loan applications submitted even compared to the previous year by 50 percent. The loan volume issued is for a total of as much as 13 years no more: About 1.29 trillion euros, Germans borrowed for the property purchase.

Especially in big cities, the buyers run the sale willing one the doors because currently, all loans seem so cheap and even make up for the increase in purchase prices. There, a loan amount of 150,000 euros is enough though for no more than a one-bedroom apartment, but for 343 euro loan installment even less than you for such one-bedroom apartments to pay rent. Seen in the enticing credit conditions even worthwhile for Metropole buyer. And there is nothing against it, simply take a larger loan for silly 0.75 percent, right?
But be careful, because many such financing can backfire. At least then, if one has not really expected until the end – so to debt freedom – or at least up to the point where actually the hook comes: at the end of the mortgage term.

Only by then the conditions in the loan agreements are in fact fixed. After that, the funding begins, so to speak once again. The loss leader from above about provision only applies to the first ten years. After that, the loan has not yet been eroded by far – on the contrary to the advertised rates, the buyer has paid only 30,000 euros, its remaining debt, therefore, amounts to a whopping 120,000 euros. And he must then refinance expensively. In a few years, the cheap interest rates of today will be a long story.

That the period of extremely low-interest rates for another ten or even 15 years continues, doubt almost all financial experts. We were told last time and again, it’ll be long before the savings interest rates again reached a very nice level. But in the lending rates, banks collect from savers that will go much faster if the central banks once again decide rising interest rates.

World Savings Day: Saving without interest

And the first signs are there: The US Federal Reserve is considering already the end of the next rate hike, although it is not yet sure if she takes him. The European Central Bank will indeed continue its program of cheap money once but has always followed the Fed at some distance by. Now, what does it mean for home buyers when interest rates rise again?