What impact will rising interest rates have on owners and buyers?

Financial experts are currently predicting that interest rates will continue to increase over the long term. This is partly due to high inflation . The rising interest rates are affecting mortgages and loans and are therefore also having an impact on property prices.

The base rate of the European Central Bank (ECB) has been at zero per cent for some time. This has made it possible to award cheap loans and mortgages. However, the base rate is no longer in line with the current rate of inflation (5.1 per cent) and must be raised sooner or later. This is something that will also affect borrowers, as the ECB lends money to the banks. The interest charges are passed on to customers.

What impact does the interest rate have on property prices?

Supply and demand affect prices on the property market. Low interest rates lead to an increase in demand and thus also in property prices. This is because more people can afford a loan or mortgage.

The inverse is true when interest rates increase. Demand and thus property prices decrease, as fewer households can afford the cost of a loan or mortgage. Owners who then arrange for follow-up financing must also reckon with higher costs for the new mortgage.

Should I sell up before interest rates increase?

Owners looking for high sales proceeds, or even relying on these to fund a new property and the costs of moving home, should sell before interest rates increase. Otherwise, profits from the sale will be lower and it will become more difficult to find buyers who have enough purchasing power and are eligible for a mortgage.

In the worst case, buyers will be unable to pay the purchase price. A repurchase may become necessary, among other things. Owners should contact a qualified and professional estate agent for support in selling and marketing their property.

When the follow-up financing becomes too expensive

Many people need their bank to finance their dream of home ownership. When an existing mortgage agreement is due to expire but the loan has not been fully repaid, follow-up financing must be secured either from the same contractual partner or from a new source. If the repayment rate for the new mortgage is too high on account of the high interest on the repayments, owners are often forced to sell their dream property. In such instances, foreclosure should be avoided wherever possible.

Ahead of the predicted increase in interest rates, owners should inform themselves whether they could afford follow-up financing or whether they can begin to repay the follow-up financing in advance. If they then determine that this is not the case, they should sell in good time before the increased interest rates affect the proceeds of the sale. After all, they will need the money to repay the mortgage.

Those who decide to sell up can benefit from the support of a professional estate agent, who can also help find a financing partner. Some marketing experts work with loan providers and can thus help broker financing agreements.

Do you need support in finding the right financing partner, or do you wish to sell your property? Then please get in touch with us. We will be happy to support you.

In this text, the generic masculine is used for better readability. Feminine and other gender identities are explicitly included to the extent necessary for the statement.

Legal note: This article does not constitute tax or legal advice in individual cases. Please have the facts of your specific individual case clarified by a lawyer and/or tax advisor.