Own home: interest rate development / interest rate / interest rate increase / conditions

We are also facing the decision of whether to initially only partially finance the land and then finalize the building plans, and only build next year. Or to secure the full amount now, with the risk of needing less or more in the end because the planning is not yet detailed enough. What would you do? Do you think interest rates will be significantly higher in 12 months, or are provision fees or prepayment penalties likely to be higher, and it would be better to finance separately in order to plan more precisely?

The answer is either or.

If interest rates rise, there will be no VFE. Commitment interest rates have always been 3% for decades. By the way, it surprises me that they are higher than the loan interest rate. I would never accept that, because then I would demand the entire amount to be paid out immediately and deposited as alternative collateral.

And if we knew the interest rate in a year, we certainly wouldn’t be here anymore.

But at 5%, the DGZF probably won’t be around for 10 years... probably.

Bereithaltungszinsen sind seit Jahrzehnten schon immer 3%. Wundert mich im übrigen, dass die höher sind als der Kreditzins.

It is by no means certain that this "usual decades-long practice" would still be accepted in court. That would be a very interesting dispute. However, the banks almost completely give in and actually charge less (in the event of a legal case).

It is by no means certain that this "usual decades-long practice" would still be accepted in court. That would be a very interesting dispute. However, the banks almost completely give in and actually charge less (in the event of a serious case).

They also know why. Presumably, it would be a very, very short dispute. That is why there will never be a Federal Court of Justice ruling on this. No bank is crazy enough, but you can "try" it and there are enough borrowers who put up with it. It is indeed surprising.

You can have the remainder paid out at the end of the provision period. It’s at least somewhat cheaper. The provision period should roughly match the construction time.

We are also facing the decision to first only partially finance the land, then finalize the construction plans, and only build next year. Or to already secure the entire amount now with the risk of needing less or more in the end, since the planning is not detailed enough yet. What would you do? Do you think interest rates will be significantly higher in 12 months, or might provision fees or prepayment penalties be higher and one should rather finance separately to be able to plan more precisely?

If you buy land now and finance it over several years, you will have a problem next year financing the house. The land register will already have a mortgage, and the next one will only be second priority. And they charge a king’s ransom for that. Or the creditor of the first loan increases the total loan, or takes out a second loan, or whatever. But then there is exactly one bank. You should definitely go to the bank and discuss this matter. There are solutions for this.

we are also facing the decision to first only co-finance the land and then complete the construction plans and only build next year. Or to secure the entire amount now with the risk of needing less or more in the end, since the planning is not yet detailed enough. What would you do? Do you think interest rates will be significantly higher in 12 months or might standby interest or prepayment penalties be higher and one should rather finance separately to be able to plan more precisely?

In theory, interest rates cannot rise for at least the next 10 years – unless large gold veins, which are state property, are discovered extensively in the Mediterranean region.

In theory, construction loan interest rates are heavily dependent on government bonds. If the demand for government bonds is high, their prices rise and banks are happy to lend money to homebuilders at favorable terms. Draghi recently purchased 122 billion in government bonds – which theoretically should create high demand in the market and cause the price of government bonds to rise.

Unfortunately, the theory in the second point is currently not working properly because the market is influenced and temporarily unpredictable. Everyone is groping in the dark.

If Draghi scales back his purchase program, in my opinion we should arrive at the original margin of about 2.5% to 3% over 25 years. Until the base interest rate rises again, we could somewhat orient ourselves to the USA.

Therefore, I do not think there will be another major jump in the next 10 years.