Current financing offer from the house bank

The long end of the yield curve is only partially related to ECB decisions. Interest rate swaps have already risen significantly, and given inflation, this was foreseeable. As long as Germany remains in the Eurozone, we probably won’t see mortgage rates of 5% or more, but I consider 3% realistic in a few years. Due to inflation, this is not such a big problem. Most people will also earn 20% more in 10 years…

Hardly most – but some. And the gap will simply widen even more. My employer has not given automatic salary increases in the 30 years of its existence. Whoever wants more has to knock on the senior boss’s door and prove that they perform significantly better than when they were hired. Which, as a woman with children, is always doomed to fail. :D

Translated, this means: Due to, for example, 500 € higher income, one can easily pay 700 € more every month.

The calculation doesn’t really add up for me. :rolleyes:

You must not forget that both the remaining debt and, as usual, the loan-to-value ratio are lower after 10 years.

The calculations get interesting when you consider that with the same initial repayment rate (e.g., 3%) for a 20-year fixed interest period, due to the interest surcharge, there is a higher repayment in the first 10 years than with 10-year fixed interest periods without the interest surcharge.
This is also the reason why 9% interest and 1% repayment used to work...

The long end of the yield curve is only partially related to ECB decisions. Interest rate swaps have already risen significantly, and given the inflation, that was foreseeable. As long as Germany remains in the Eurozone, we will probably not see mortgage interest rates of 5% or more, but I consider 3% realistic in a few years. Due to inflation, however, this is not such a big problem. Most people will also earn 20% more in 10 years…

If it happens exactly as you describe, it will be a big problem because of inflation. A 20% salary increase in 10 years means about 1.95% salary growth per year. What is the projected inflation rate for this year again? How will the CO2 price develop in the next few years? 3% loan interest with a 10-year fixed rate term will not occur with 1% inflation as in recent years; it will be higher then as well.

One can discuss this endlessly.

Yes, the gap will widen. But the development is not new and not limited to real estate. Not that I think it's good, but that's the current development.

However, I don't know why people have such a hard time with the idea of 3% interest. By the way, the topic of 3% was actually triggered here for 20-year fixed interest, not for 10-year.

Of course, with rising interest rates, the calculation will be different for many who finance. Then we would already be off-topic. But I gladly write here as in other threads... there are still many who earn enough and/or inherit or receive as gifts. I don't see prices tumbling yet. Then there are only 20 buyers for a property instead of 50.

As long as the economy grows, it will work. The biggest bottleneck currently is supply shortages. But if we get that under control, I believe the economy will continue to grow.

And again, whether one likes all the accompanying effects is another matter.

But to bring it a bit on topic... if I had to make a decision, I would be grateful for anything I had fixed...

I see interest rates with a 10-year fixed rate also rather at 2-2.5% in the coming years. KFW-124 was already at 1.62% last week. I also don’t understand why many financings were concluded in the last 2-3 years during the absolute low-interest phase with a 10-year fixed rate instead of 20-30 years with a slight interest premium. In the future, no better loan-to-value ratio will be able to offset the rising interest rates in the future monthly rate. Although, for example, with falling or stagnating market prices, the loan-to-value can also fall! Then you started with 100% loan-to-value and unfortunately are only at 95% loan-to-value after 10 years due to slightly fallen prices, with an interest rate of 2-3% instead of the original 1.0-1.5%. Most of our customers were sold fixed interest rates over the entire term. I myself also concluded a 30-year fixed interest rate with 1.66% in 2019. The interest premium of maybe 0.4% is worth the long-term security to me. If after 10 years the interest rates are unexpectedly lower, I can still refinance. Otherwise, I simply sit out 30 years with 1.66% (with 2-5% inflation annually and at least 1.45 salary increase per year). I don’t even use the special repayment option but rather invest the special repayment in an ETF.

A small surcharge is often not so small at all. In my case, it was about 1.3% over 15 years and 1.45% over 20 years. KfW makes up over a third of the amount and is fixed anyway for 10 years. I then received 2 L-Bank loans at about 0.72% for the rest. That then makes about 3% for the follow-up financing so that a longer term is worthwhile. Tending towards needing even more, since an old home savings contract with 3% is still being paid into, which will mature for allocation this year and can then pay off another 20,000€ in 2031 for the follow-up financing. The remaining debt of 225-230k then results in a great loan-to-value ratio for the follow-up financing, even if the value were to drop somewhat, so I can look forward to this topic with ease. It would already require interest rates well over 5% to cause me problems. But the crucial factors are, of course, that we have an affordable plot of land, I have waived some cost drivers (basement, garage) in the house, provide over 20% equity accordingly, and keep the remaining debt small with a decent repayment. Kamikaze financings with 100% external funds and low repayment obviously look different.

Whereas the long fixed interest rate term also only buys a false sense of security. The other risks remain: divorce, illness/accident with occupational disability, general economic downturn in the region, and so on. These are just as dangerous in a tightly calculated financing, if not even more so. I can plan a follow-up financing and calculate the risk for certain interest rates. The other dangers come unexpectedly.

Those who want more have to knock on the senior boss's door and prove that they contribute significantly more than at their hiring.

That sounds like a real program to increase turnover.