
ECB cuts key interest rates: Will construction loans now become cheaper?
real estate prices are rising again
Lower construction interest rates in recent months have boosted demand for real estate. Anyone planning to buy a property or build a new home should not put their plans on hold any longer. The Institute for the World Economy (IfW) in Kiel identified a trend reversal back in August 2024: residential property prices are rising again.
One important factor influencing the real estate market is purchase prices. In recent months, the trend toward rising real estate prices has already been observed in many places.
So anyone speculating on even lower construction interest rates and postponing the purchase of a property could end up losing out. Rising property prices could quickly eat up any savings made on interest. In the current situation, it therefore seems advisable not to postpone buying real estate unnecessarily.
Background: How lower key interest rates are affecting the market
The ECB Governing Council sets the key interest rate approximately every six weeks in order to stabilize inflation at two percent. These decisions have a direct impact on the real estate market, influencing buyers, builders, investors, inflation, and the economy as a whole.
The ECB's third interest rate cut on October 17, 2024, has once again set the real estate market in motion. The key interest rate was lowered by 0.25 percentage points, bringing the interest rate on deposits down to 3.25%. This decision was made in the context of declining inflation, which fell to 1.7% in September 2024, below the ECB's inflation target for the first time in more than three years.
Buy now: How financing works
Experts assume that interest rates have reached their lowest point and will remain stable or even rise slightly in the coming months. In addition, real estate prices have already risen again. However, potential real estate buyers should not get their hopes up too high for further declines in construction interest rates.
So if you want to buy a property, you should act now and not wait for further interest rate cuts. Buyers should ensure that their financing is arranged in advance in order to accommodate sellers. They should be able to demonstrate equity of at least 20-30 percent of the purchase price in order to convince the banks. It is also worth checking government subsidies for energy-efficient properties in order to take advantage of grants and tax benefits.
Are you unsure how interest rate cuts will affect your financial situation? Then it is best to seek advice from a financial expert or real estate agent. An experienced agent can not only assess the market situation, but also find suitable properties and provide you with optimal support during negotiations and financing.
Are you looking for support with buying a property? We offer expert advice and can recommend independent financing experts. Contact us. We will be happy to advise you!
Note
For reasons of better readability, the generic masculine form is used in this text. Female and other gender identities are expressly included insofar as this is necessary for the statement.
Legal notice: This article does not constitute tax or legal advice in individual cases. Please consult a lawyer and/or tax advisor to clarify the facts of your specific case.
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