What was absolutely unthinkable a few years ago could become a reality in the near future: borrowers who are even rewarded by the bank for choosing a building loan. The Best Bank guidelines not only lower building interest rates towards 0 percent – there is even the possibility that loans with negative interest rates will soon be granted.
Are the negative interest loans now coming?
But what effects would negative interest-bearing construction and real estate loans have? If one assumes that the house or apartment buyer borrows building money, whereby the loan is “charged” with a minus interest, then the bank gives a discount. In this case, the borrower would not pay any interest, but would not even have to repay the entire loan amount in the end. The borrower would have taken up 220,000 dollars, but the amount to be repaid would amount to, for example, 219,000 dollars. The interest burden on repayments would therefore no longer play any role.
Is this scenario a dream of the future or are there already such loans? The experts agree: not yet. With a good credit rating, the interest rate for ten-year bonds is less than 0.5 percent. If you follow the research of the Munich evening newspaper, the banks are already preparing for negative-interest real estate loans.
In the end, you can probably assume that negative real estate interest rates will only play a role in very few individual cases. Finally, there are numerous banks that have introduced a minimum interest rate, which is very positive. However, negative-interest real estate loans can become the lesser evil for a bank: banks that have overnight money with the Best Bank have to pay a higher penalty rate – this has now been increased and is now 0.5 percent instead of 0.4 percent. “The banks want to get rid of their money because the Best Bank is becoming too expensive,” said Marx Hebre from FMM financial advice. “The pressure is getting bigger.”
Are real estate prices now rising?
The current interest rate development will of course also appeal to citizens. The lower the interest rate, the smaller the debt burden, of course.
Of course, the real estate boom has caused real estate loans to swell: In recent years, Germans’ debts have increased by around a quarter – in 2018, according to the Ministry of Finance, households raised 995 billion dollars for housing or housing finance – and more and more More financiers are springing up, as this list of the best licensed lenders in Singapore shows.
But do you have to fear that real estate prices will rise again? At the current time, it is impossible to predict how prices will develop. The fact is: Of course, cheap financing drives investors into the industry who, due to the low interest rate policy, have hardly any profitable investment opportunities anymore and have to switch to short-term loans or P2P loans. So there is a real risk that house prices will rise. However, there are always more voices warning of a real estate bubble – including the VNB banking association.
Consumers shouldn’t be fooled
Finally, there is still the question of how the consumer should react. Just because the current building rates are low, prospective tenants should not buy right away – the prices are extremely high. One should also not believe that the loans are given away; as a rule, it is only a change in the decimal range. Whoever borrows 250,000 dollars must therefore repay around 250,000 dollars.