Mortgage rates in Germany Hit Their 10 Years Maximum

Mortgage interest rates in Germany have reached their highest levels in the last eleven years. As a result, a significant drop in a number of requests for mortgage loans is currently taking place.

According to the European Central Bank (ECB), the average mortgage interest rate in Germany reached 3.03 percent in September 2022, which is one of the highest rates in the whole eurozone. Moreover, this figure more than doubled in comparison with the same period last year. According to the FMH-Finanzberatung, the interest rate on mortgages with fixed interest period of 10 years is currently 1.69 percent on average in Germany, and 1.98 percent – on mortgages with period of 15 years. For comparison, two years ago, historical lows were 0.62 and 0.89 percent, respectively.

Such a sharp increase is a side effect of several ECB interest rate hikes aimed at counteracting rising inflation in Germany. Dramatically growing borrowing costs have undermined demand for mortgage lending in the eurozone. According to the latest ECB survey, this figure fell by 42 percent in the third quarter of this year, which was the largest drop since 2012 (not counting the recession associated with the COVID-19 pandemic two years ago).

The ECB report clarified that the fall in demand for mortgage lending was “particularly felt” in Germany. Both private buyers and investors at the moment are not planning to apply for a mortgage loan to purchase any property. As a result, there were about 25 percent fewer loans issued in the third quarter of 2022 than a year earlier, according to the Hypoport financial services provider. Eventually, interest rate increases throughout Germany are currently at their highest levels since 2009.

The ECB has already announced it is likely to continue tightening policy at its next monetary meeting.

At the same time, experts note that while maintaining the current demand for real estate, there is a possibility of a shortage of supply. As Michael Meumann, CEO of Dr. Klein claims, many people will continue to demand for their own home ownership, despite such factors as inflation, rising cost of living and rising energy prices.