Construction field 2017: Will mortgage rates for real estate loans rise?

Many households are determined to fulfill their dream of owning their own home in 2017. The interest in mortgage lending and thus mortgage interest rates is already high. No wonder, after all, they have a big impact on the cost of real estate financing. Builders and buyers want to finance their houses and apartments as cheaply as possible – further low mortgage rates would be desirable.

Many aspiring borrowers want to know how property loan rates develop over the year. Therefore, we have dared a small outlook on the interest rate development and would like to make a forecast on the interest rates.

Business retrospect on the previous year


Last year, the interest rate market for mortgage lending was comparatively quiet. Mortgage rates have remained at a relatively low level. Although there were some fluctuations, on the whole borrowers could not complain about the construction interest. In historical terms, the construction field was extremely cheap and the market was not too dynamic. In the years before, banks have reacted more frequently, and there have been much more pronounced fluctuations in interest rates.

Interest rate development: The biggest influences


How the construction field develops in 2017 depends on several factors. The key interest rates, which are determined by the central banks, have the sometimes largest influence. In this environment, the Federal Reserve (FED), the central bank of the USA, last caused a surprise. In December 2016, Fed Central Bank Governor Janet Yellen announced an increase in the US prime rate. At the same time, it made it clear that further rate hikes for 2017 can not be ruled out.

From the perspective of builders and buyers, a turnaround in interest rates, which leads to rising mortgage rates, is not pleasing. Construction money threatens to become more expensive, which increases the cost of real estate financing. However, budding borrowers can be relatively relaxed about the situation in the US. The reason is the interest rate policy of the European Central Bank (ECB).

The European central bankers go namely a different course. There are still numerous states in the EU that could be in financial distress as a result of a rate hike. In addition, rising key interest rates could jeopardize some banks. Just consider the situation in Italy. In December 2016, the Italian government had to intervene and financially help a large bank to prevent a collapse.

In addition, a look at the economic forecasts for Germany is recommended. Most institutes assume stable or slightly subdued growth in gross domestic product (GDP). Accordingly, no decisive signals are sent here, which could bring the ECB to relent.

Another factor is the development of supply and demand in the area of ​​real estate financing. Demand for mortgage lending has been high in recent years due to low construction rates. Strong demand can lead to rising prices or, in this case, rising interest rates. So far, demand is expected to remain roughly constant compared to 2016, with no signs of a significant increase or decrease in demand for real estate loans.

Our banks and construction field forecast for 2017

Our banks and construction field forecast for 2017

One preliminary information: We are unable to make a binding statement about the development of mortgage rates in 2017. Nobody can do that, even well-known experts such as the chief economists of various banks are occasionally wrong despite extensive analyzes with their forecasts. However, we can give an estimate for mortgage lending 2017.

In view of the difficult conditions in Europe, we believe that an increase in the key interest rate in Europe and thus a rise in interest rates are unlikely. The demand for real estate loans should not change too much in Germany. In short: We expect a relatively stable interest rate environment, ie we do not expect either rising or falling mortgage rates.

This is a good prospect for aspiring borrowers. From the fact that the construction field is significantly more expensive in comparison, can not be expected. However, there were certain interest rate fluctuations in the past year that could intensify in 2017. One of the biggest interest rate risk factors is political development within Europe. The British are busy working on their Brexit and in September a new government is being elected in Germany.

In view of this risk, stronger temporary fluctuations in the interest rate market can not be ruled out. At the same time, it can be assumed that banks will react to such changes at different speeds and adjust their conditions for construction money. It is therefore more important than ever for aspiring builders and buyers to look into the interest rate market and compare the terms of individual banks for mortgage lending comprehensively.

Business 2017 – by comparison to low-interest mortgage lending

Business 2017 - by comparison to low-interest mortgage lending

We will continue to stick to our tried-and-tested concept in 2017 and provide advisory support to prospective borrowers. Completely non-binding and free of charge, we develop tailor-made financing proposals and then examine the market for favorable construction money conditions.

Overall, we can determine the current mortgage rates of more than 400 financing partners (banks, building societies and insurers) in our mortgage lending comparison. Thus, we find the right real estate loan with low interest rates for every builder, home buyer and housebuilder.