Mortgage loans have become much more expensive in the past six months – and the upward trend continues.
Anyone who has needed a loan in recent years has had it right. Thanks to the zero-interest policy of the European Central Bank (ECB), financing was cheaper than ever. Just six months ago you paid 0.65 percent per annum (nominal), 15 years 0.75 percent or 20 years in the fixed-income sector with excellent credit.
With variable interest, the best conditions were only 0.25 percent. Since then, however, it has been steadily going uphill. Currently the best mortgage offers in Austria start at 2.30 percent (ten-year fixed), 2.45 percent (15-year fixed) and 2.60 percent per annum (20-year fixed) – provided you have very good creditworthiness have.
With variable conditions, the top loans (still) start at 0.75 percent per year. “At ten-year fixed interest rates, the interest rate has almost quadrupled and tripled in the variable area,” emphasizes expert Alexander Meixner of credit broker Creditnet. Applied to a concrete example, this means that a new 20-year fixed-rate loan of EUR 300,000 with a total term of 30 years is currently more than 52,000 percent more expensive than six months ago.
But an end to the interest rate hike (see chart above) is not in sight, quite the contrary. To counter the high inflation, the ECB announced a 0.25 percentage point increase in the key interest rate in July and probably 0.50 percentage point in September. If prices continue to rise, even bigger rate hikes are conceivable, ECB boss Christine Lagarde recently emphasized. This would make all new loans and existing floating rate loan agreements even more expensive.
In addition, mandatory minimum requirements for lending will apply from 1 August. For example, private individuals need at least 20 percent equity capital. “If you look at the past year, if the guideline had been interpreted strictly, only three out of ten borrowers would have received funding,” Meixner said.
The new equity hurdle is certainly a difficult challenge for some loan applicants. In any case, the imminent tightening has already been reported: for example, the financing demand at Creditnet has recently increased by an estimated 15 percent.
It is not yet possible to estimate how far interest rates will eventually rise. The only thing that is certain is that it will become more expensive. So if you need a loan, get it as soon as possible.
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
