Mortgage rates continue to fall

No one can currently expect high interest rates on their savings. More and more banks are even terminating premium savings contracts. But the low-interest-rate environment also has an advantage: loans and credit are now cheaper than ever. Experts assume that we could soon see zero percent interest rates or even negative interest rates.

In Denmark, it's already a reality: Nordea Bank is offering interest-free mortgages with a 20-year term. In Germany, according to an analysis by the mortgage broker Interhyp, banks are currently still somewhat more cautious. However, interest rates are also at record lows here. Those with good credit can expect interest rates as low as 0.4 percent for a ten-year term, depending on the lender. The analysis compared the terms and conditions of more than 400 lenders.

Why are interest rates so low right now?

The days of high interest rates, which made financing real estate a nightmare, are long gone. Back in 2016, the European Central Bank (ECB) lowered its key interest rate to 0 percent. Banks that borrow money from the ECB don't have to pay any interest and can pass these favorable conditions on to their customers. The ECB is going even further, however, and is charging negative interest rates on large savings accounts. This makes depositing money currently unattractive for banks, making lending profitable. With these measures, the ECB aims to stimulate the economy. When saving is unattractive, people are more likely to spend it, and the economy grows.

Zero percent interest or even negative interest rates?

Financial experts consider it very likely that mortgage rates in Germany could soon fall to 0 percent for borrowers with good credit. After all, banks currently have to pay 0.5 percent interest when they deposit excess funds with the ECB. While they don't make a profit by issuing interest-free loans, unlike with traditional investments, they also don't lose money.

Theoretically, it is therefore even worthwhile to grant loans with negative interest rates below the aforementioned 0.5 percent. After all, the bank is still giving away less money than it would lose if it deposited its money with the ECB.

For homebuyers, this would be a dream come true. Anyone taking out a loan of €100,000 would only have to repay €99,000 with a negative interest rate of 0.1 percent. However, when contacted by Finanz-Szene.de, both Deutsche Bank and Commerzbank stated that they are not currently planning any loans with negative interest rates.

Even with current low interest rates, demand for real estate is likely to continue rising – and with it, prices. For those looking for property, a sufficient equity stake is therefore crucial. For owners, now might be the perfect time to sell.

Do you want to sell your property and benefit from this high demand? Contact us now. We would be happy to advise you.

Legal notice: This article does not constitute tax or legal advice for any specific case. Please consult a lawyer and/or tax advisor to clarify the facts of your individual situation.

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