
Will negative interest rates soon apply to real estate purchases?
An analysis by mortgage broker Interhyp shows that interest rates for ten-year fixed-rate loans have fallen below the 0.5 percent mark in recent weeks, depending on creditworthiness and bank. The financial services provider compared the terms and conditions of more than 400 lenders.
Real estate buyers with good creditworthiness can therefore look forward to interest rates of just 0.4 percent per year for the next ten years in some cases. The Danish Nordea Bank has even gone one step further. Here, real estate buyers can borrow money for 20 years without paying any interest.
Where do these low interest rates come from?
The interest rate policy of financial institutions is largely controlled by the European Central Bank (ECB). It lowered the key interest rate for lending to 0 percent back in 2016. This means that when banks borrow money from the ECB, they do not have to pay any interest on it. Conversely, however, there is currently a negative interest rate on deposits with the ECB. This means that banks have to pay to deposit large sums of money. Accordingly, it is currently worthwhile for banks to lend their money in the form of loans and credits.
Could negative interest rates on loans become a reality?
The negative interest rate for cash deposits at the ECB is currently -0.5 percent. In theory, it could therefore be worthwhile for a bank to grant a loan with a negative interest rate of -0.1 percent. For a real estate buyer, this would mean that they would only have to pay a total of $99,000 on a loan of $100,000, for example. Currently, however, most banks are opposed to such a negative interest rate policy. In response to an inquiry from the Finanz-Szene.de portal, Deutsche Bank stated that it has no plans to introduce negative interest rates at this time. Commerzbank also announced that negative interest rates are not conceivable at present.
Financial experts also expect construction interest rates to fall to 0 percent. They consider negative interest rates to be possible only in exceptional cases.
For real estate buyers, the current low interest rate policy means that financing a property is easier than ever before. However, prices continue to rise, so a larger equity share is necessary. Owners who are considering selling their property can currently look forward to high demand thanks to low interest rates.
Would you like to sell your property and benefit from this high demand? Contact us now. We will be happy to advise you.
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