A turnaround in interest rates could become a heavy burden for the banks.
(Photo: Deutsche Bundesbank)
Frankfurt The Bundesbank is alarmed about the banks’ lending in the hot real estate market and reserves the right to impose additional restrictions. The granting of residential real estate loans continues to rise, although buyers bring less and less equity, warns board member Joachim Wuermeling in an interview with the Handelsblatt. “The growth is taking place in a market that is becoming increasingly vulnerable due to rising real estate prices.”
There is a risk that buyers will become over-indebted. According to Wuermeling’s assessment, the banks also have to be careful for another reason: for more than half of all housing loans to private households, banks have promised their customers fixed interest rates for ten years, says the supervisor. “In the middle of a turnaround in interest rates, banks would still have very low-interest loans on their balance sheets for a few years, but would have to pay higher interest rates for refinancing.”
Read the entire interview here:
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