Rising Demand for Real Estate Loans
There was every reason to expect demand for private construction finance to take a nosedive at the height of the corona virus crisis. What actually happened, however, is the exact opposite, meaning that the volume of private building loans approved by the Bundesbank in April increased over prior-year month, and substantially so at 5.2 percent, up to 24.3 billion euros.1 This is remarkable insofar as April was a month particularly hard hit by the coronavirus lockdown.
As recently as March, the Bundesbank—and many other financial institutions with it—had assumed that demand for mortgage loans would collapse. That things took such a remarkable turn for the better goes to show just how coveted residential real estate truly is at the moment, despite the corona virus crisis, and that many consumers are prepared to finance a piece of real estate even in times of crisis.
Even Savings Banks Report Elevated Demand
As the Immobilien Zeitung real estate trade paper wrote, the German Association of Savings Banks and Girobanks (DSGV) not only confirmed the figures released by Bundesbank but actually topped them. New lendings approved by German savings banks increased by 12.1 percent over prior-year month in April. During the time between January and April, savings banks actually registered an increase by 19.3 percent over prior year period.
Going forward, the German Association of Savings Banks and Girobanks expects demand to remain stable. Indeed, the association anticipates a further rise in demand as soon as in-person meetings and viewings become possible again on a larger scale.
Building Finance Rates on Historically Low Level
One of the reasons for the keen demand for real estate loans is surely that interest rates for private construction finance keep lingering on a level close to the all-time low. In early June, the interest for loans with a fixed-interest period of ten years was down to around 0.8 percent, according to the Interhyp mortgage broker. Property buyers with impeccable credit ratings and a high equity capitalization can actually expect to get even better terms of finance.2
According to Interhyp, there is no sign that interest rates for real estate loans will go up any time soon. The company asked ten financial institutions for their expectations, and the majority of them assume that the favourable interest situation is unlikely to change before the end of the year.