Insiders Expect Level of Mortgage Lending Rates to Remain Stable


April 2020

Due to the low-interest policy pursued by central banks at the moment, interest rates have been in more or less steady decline over the past years. For a brief time in 2016, it seemed as if the interest level had already bottomed out and that real estate buyers would have to get used to higher lending rates again, before the interest curve unexpectedly declined further and hit its all-time low, for the time being, in March 2020.

For many private households, the effective interest rate for their mortgage loans with a fixed-interest period of ten or 15 years is now below one percent. This compares to an average between four and five percent as recently as 2011 (source: But what is the way forward now, even and especially in face of the coronavirus pandemic and its diverse ramifications?  

Aggressive Monetary Easing Policy Continues

In the wake of the trough in early March, the average interest rate for loans with a fixed-interest period of ten years that were available through the Interhyp mortgage broker bounced back slightly from 0.68 percent to 0.83 percent. The development in building finance rates is currently influenced by a number of factors – especially, of course, by the key lending rate of the European Central Bank, but also by the development of government bond yields.

Central banks both in Europe and in the United States, having started easing their monetary policy last year, eased them even further in face of the coronavirus pandemic, which would principally point to low building finance rates. Then again, the global economic jitters and the high costs of government aid programmes have modestly raised returns on government bonds, which inversely pushes up building finance rates (source:  

Any Rise in Lending Rates is Likely to be Negligible

Banks polled by the Interhyp mortgage broker effectively expect to see a lateral movement in building finance rates in 2020, meaning that interest rate are unlikely to move noticeably in either direction. An increase in volatility, meaning that the building finance rate level will fluctuate more than usual, is nonetheless to be expected (source: Experts of financial intermediary Dr. Klein analogously predict both an increased volatility and a very low level of building finance rates in general. The way they see it, even a possible interest rate hike in the course of the year is bound to be moderate because of the continued aggressive monetary easing policy pursued by the European Central Bank (source:

Insiders at Interhyp emphasise in any case that potential property buyers should not let themselves be distracted by the day-to-day development of lending rates. Perhaps most important is the prospect that building finance rates will, historically speaking, remain on an extremely low level, and thereby strongly encourage investments in residential real estate.

Further readings


The Key Lending Rate

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Interest rates come into play everywhere – just think of home loans, fixed income or savings. Their level is modelled on the key lending rate, which is set by the European Central Bank (ECB).
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German Savings Ratio Is High, Homeownership Rate Remains Very Low

16. July 2020

Compared to other countries, private German households show a higher-than-average savings ratio.
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