Mortgage Rates In Germany Houses Rate Might Rise

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Mortgage Rates In Germany Houses Rate Might Rise German households are being squeezed. mortgage rates have hit 3% just as raging food and energy inflation is taking money for housing off the table. At the same time, housing affordability is severely constrained: house prices have risen 80% since rates were last this high back in 2013 but income has grown by just 25%.


But our base case is for declining transaction numbers and flatlining nominal prices, hence declining in inflation-adjusted terms rather than a collapse. First, because the under-supply of housing in Germany prevails, particular in metropolitan areas.

As overall inflation also pushes up housing construction costs, building permits are starting to decline. This is unlikely to change in the near term. Another factor supporting prices is that many German borrowers have locked in lower mortgage rates for longer periods, making them more resilient to interest-rate increases.

Mortgage Rates In Germany Houses Rate Might Rise


You are an expat living the life in Germany. You have a highly paid job, live in a metropolitan area, and feel at home here. Maybe you have started a family and would like to own your own home, because the cost of renting a house or a nice large apartment significantly exceeds what you could be paying for a mortgage.

If you are an EU citizen or have a long-term residence and work permit in the EU, no problem! All you need is enough equity capital to pay the transaction costs – things like land transfer tax, notary fees and the estate agent’s commission. Assuming the amount you want to borrow is not more than one hundred times your monthly net income, including child benefits (Kindergeld), you will get a mortgage from the bank with the most favorable terms.

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If, however, the German economy were to tip into severe recession leading to higher unemployment, mortgage defaults and forced sales, house prices would collapse. But we see this scenario as remote. Downside risk remains, not least the risk of Russian counter-sanctions leading to interruptions of gas flows into Germany before the currently envisioned phase-out, as well as trade disruptions caused by China’s hardline zero-Covid policy, which will hold back German exports.

Mortgage Rates In Germany Houses Rate Might Rise

READ: Uk Mortgage Rates & High House Prices/Rents

The actions of banks and banking supervisors could be key determinants of house prices. If banks loosen mortgage underwriting standards, house prices could even continue rising. Looser standards could see households, already suffering the effects of stretched affordability, lured into taking on riskier debt in the form of higher LTV loans with lower amortisation and/or shorter fixed-interest periods.