Construction costs are currently skyrocketing

The fixed interest rate period for the financing of my son's property expires in December 23. The bank has already offered me a follow-up financing at 3.7%. I therefore think the banks are not expecting rising mortgage interest rates. I have little knowledge on the subject, but if fewer and fewer people are taking out construction loans, shouldn't there be some competition among the banks, and shouldn't there be banks that offer cheaper financing, just slightly above the base rate?

The bank only has the option to slightly reduce its margins. However, to my knowledge, these are generally always (except for small differences) the same. Whether the interest rate is at 2% or at 6% - the bank has to refinance itself at a higher interest rate and earns roughly the same margin on a financing. Therefore, the banks have little room to maneuver, and that's why there is little competition. Lending at the refinancing rate or just above it would make the whole business unprofitable because the bank also has its cost structure, which must be covered by the interest charged to the end customer.

And the interest rate trend for construction loans has probably already priced in further base rate increases up to the present time. What is interesting is what happens in the remainder of the year. If the base rates are further increased, even though the markets have already anticipated that there will be no further hikes by the ECB, then mortgage interest rates will of course also move higher.

The bank only has the option to slightly reduce its margins. However, to my knowledge, these are usually always (except for small differences) the same. Therefore, banks have little room for maneuver and that is why there is little competition. Lending at the refinancing rate would make the whole thing no longer a profitable business.

And the interest rate development for construction loans has probably already priced in further key interest rate hikes up to the present time. What is interesting is what happens in the further course of the year. If key interest rates are still raised further, even though the markets have already expected that there will be no further increases by the ECB, then construction loan interest rates will of course also move upwards.

Well, a direct bank surely has fewer costs than a branch bank. So, there should be some room for maneuver. And of course they can slightly reduce their profits and then charge just a bit above the refinancing rate. That works in almost all other areas as well.

Well, a direct bank surely has lower costs than a branch bank. So there should be some room for maneuver.

The room for maneuver has probably been exhausted for years. Direct banks usually already have better conditions.

And sure, they can cut their profits a bit and then only charge slightly above the refinancing rate.

Do you also suggest cutting revenues to your boss? ;) I also think that the key interest rate range up to 3% is more or less priced in. Above that it gets interesting, because then not only the level but also the time component plays a role. If everyone expects that a 4% key interest rate is only temporary and for example will go back down to 3% in a year, it will hardly make a difference. But if the expectation takes hold that we might be at 5% for a longer period, then mortgage rates will rise significantly again. It’s all hard to predict; during Paul Volcker’s time, there was already a very clearly double-digit key interest rate in the USA ;)

Do you also suggest cutting revenue to your boss? ;)

Nope, any sane boss comes up with the idea themselves that cutting revenue is better than no revenue at all.

Well, a direct bank certainly has lower costs than a branch bank. There should definitely be some leeway.
And of course they can reduce their profits a bit and then only go slightly above the refinancing rate.
This works in almost all other areas as well.

Sure, the margins can always be adjusted a bit – but there are relatively tight limits to this, which only have a very small impact on the end consumer. Because whether the interest rate is 4.0% or 4.1% honestly doesn’t decide whether a project is feasible or not.

Has anyone of you recently received offers for a photovoltaic system (with or without storage)? What is the current price per kWp?