Since their previous low at the beginning of July 2016, construction rates have more than quadrupled. Although they are still at a low level, further increases are only a matter of time. However, it will not only be expensive for people who receive new building loans. The follow-on financing required for almost all real estate financing is likely to be costly.
Anyone concluding a new loan agreement today should therefore opt for the longest possible interest rate commitment period. Experts advise at least ten, better still 15 years. In addition, as much of the residual debt as possible should be redeemed before the interest rate lockout expires. Otherwise, increased interest rates on follow-up financing threaten high monthly burdens.
Every percentage point costs a lot of money
The building society LBS has calculated how expensive interest rate increases for borrowers are. Who takes up a loan of 200,000 euros, currently has to pay about 250 euros in interest per month – at an interest rate of 1.5 percent. If interest rates only rise by one percentage point, the monthly interest charge is already 416 euros. Another percentage point costs an additional 167 euros, with a rate of 4.5 percent, borrowers even pay 750 euros per month. In other words: Within ten years, a percentage increase in interest rates will result in additional costs of just under € 18,000.
“Each percentage point costs on the repayment period a lot of money,” summed up the CEO of LBS West, Jörg Münning. Consumers can protect themselves against rising interest rates only if they secure the current low interest rates on construction loans for as long as possible. Fixed interest periods should be set to at least ten, better 15 or even 20 years. Even if the interest costs are now higher than for shorter maturities. Due to the – more than likely – interest rate rise is still worth it.