Current low interest rates do not justify a waiver of mortgage lending

Ten years ago, builders could only dream of the current conditions for real estate loans. Anyone who requests a loan today and is offered standard terms will be able to look at an interest rate that is well below the 2 percent mark. Interest rates between 1.4 and 1.8 percent are not uncommon.

The majority of those interested are aware that these are absolutely dream conditions, some years ago interest rates were even higher. Accordingly, it is possible to borrow large amounts of money without the monthly loan installments skyrocketing.

Importance of the comparison is often underestimated

Importance of the comparison is often underestimated

However, the low mortgage rates also have a downside. Many prospective borrowers are so enthusiastic that they no longer consider soliciting loans as necessary. Some people find interest rates in the range mentioned above to be very cheap and therefore do not see any need to make a mortgage lending comparison . However, this way of thinking is wrong, as we will briefly clarify below.

In order to answer the question of whether loans are cheap or expensive, it is essential to compare them with financing offers from other banks. The decisive factor in the end is always the difference between the individual interest rates. These differences are often underestimated. They are of great importance, but a difference in interest of only 0.15 percent would result in a loan amount of 200,000 euros at annual additional costs or just a saving of 300 euros – calculated at ten years (repayment excluded), this would after all 3,000 euros account.

Now comes the crucial conclusion: Whether the average market interest rate is now 1.5 (approximately the current market conditions) or 9 percent (mid-1990s), does not matter – the difference in the previous example between two current financing offers, which at 0 15 percent, would always promise the same savings.

 

 

Leave a Reply

Your email address will not be published.