The SPD legal expert Zanda Martens is now bringing state aid for real estate buyers into play who are getting into financial difficulties because of rising interest rates. “In this phase of high interest rates, which is beginning due to inflation, it would make sense to withdraw mortgage interest rates from profit-oriented market forces and set up a large state loan program from KfW – but only for needy families who use their own homes,” Martens told the Handelsblatt.
The SPD MP also considers such a step to be necessary “because even normal earning families can no longer own their own homes due to inflation and increased mortgage interest rates and the housing construction industry is suffering from a decline in orders”.
Martens also fears tougher times for tenants. “Because with rising interest rates on loans and high construction costs, many people can no longer afford to own property or are withdrawing from construction projects,” she said. As a result, more rental apartments would be in demand, which would further reduce the supply and allow rents to rise even more sharply. “In Germany, this affects millions of people, since only around half of the population owns their home,” explained the SPD politician.
Interest rates for ten-year financing have recently climbed above the four percent mark again, as shown by data from the credit broker Interhyp.
Residential real estate is the most frequently auctioned property type
According to the experts at the specialist publisher Argetra, who evaluate the dates for foreclosures at almost 500 district courts in Germany, the rising cost of living and interest rates will make themselves felt in foreclosures from the middle of the year.
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Ernes Shabani, Argetra Director Operations & Sales, explains: “Depending on the district court, it takes between six months and 1.5 years until the opening or the foreclosure date.”
A current Argetra report states that the risks involved in financing single-family homes and apartments have been increasing “for years”: “This means that residential properties are again the most frequently auctioned type of property.” In the past year, 12,077 properties with a market value of around 3 4 billion euros called up for auction.
According to surveys, residential property is the most frequently auctioned property type.
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The chairwoman of the building committee in the Bundestag, Sandra Weeser (FDP), fears that more people will have to sell apartments or houses this year because they can no longer afford the follow-up financing due to the rise in interest rates. “Those whose long-term loans with a fixed interest rate will expire in the near future will be hit particularly hard by the current interest rate level,” Weeser told the Handelsblatt.
Even if those affected try to get a so-called “forward loan” at an early stage and find out about the various options for follow-up financing, the increased interest rate level will lead to significantly higher rates.
Housing benefit against emergency sales
In the worst case, explained the FDP politician, the repayment is so high that financing is no longer possible or takes significantly longer. “This means that many households would inevitably have to consider selling the property again in order to avert greater financial damage,” said Weeser. “That would be the absolute worst-case scenario.”
The federal government has so far reacted cautiously. Christian Lindner’s (FDP) Federal Ministry of Finance said at the request of the Handelsblatt that Klara Geywitz’s (SPD) Federal Building Ministry was technically responsible.
According to the Federal Ministry of Building, there are currently no figures on the number of households that could have problems with real estate financing due to the rise in interest rates in recent months.
The federal government has so far reacted cautiously to possible state aid for property owners.
(Photo: dpa)
However, the housing allowance can also support households in owner-occupied housing “and can therefore also be used in the event of difficulties in connection with loan follow-up financing,” said the von Geywitz department.
After the housing benefit reform that came into force in January, house and apartment owners can apply for housing benefit – the so-called load subsidy. The costs for debt servicing and ancillary costs are subsidised. However, it is questionable whether these funds can really prevent fire sales.
In the federal states with their own development banks, the assessments are different. North Rhine-Westphalia, for example, is examining the possibility of funding follow-up financing. In Bavaria it says: “Projects that have already been financed cannot be subsequently funded.”
Short fixed interest rate at your own risk
In Lower Saxony there are currently no considerations for explicit help for follow-up financing for borrowers. The state government calculates that the average of the last 20 years with a ten-year fixed interest rate was around four percent – and thus corresponds to the current status. Therefore, from a “market perspective”, there is still no “alarming level”. If that changes, steps could be taken to help households “finance and maintain home ownership.”
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In another federal state, unofficially concerns were heard. If efforts are made to subsidize follow-up financing as well, those who have deliberately chosen a short fixed interest rate due to favorable conditions would be given a subsidy. Politicians would then have to put up with the accusation of using tax money to reward the “interest gambling” of individuals – apart from a lack of funds for such support.
More: Financial pressure on property owners is increasing.