Real estate buyers have to raise more and more equity
In view of higher interest rates on loans and expensive materials, homebuyers and builders have to bring more money with them. On average, owner-occupiers contributed a good 142,400 euros in equity to build or buy a property in the first quarter – almost ten percent more than in the first quarter of 2022 (around 129,900 euros). This is shown by data from the mortgage broker Hüttig & Rompf.
According to this, in the first quarter of 2022 an average of 22.6 percent of the purchase price was contributed from own funds; at the beginning of this year it was 28.5 percent. In the case of owner-occupiers alone, the equity share increased by 6.5 percentage points, it said.
According to the evaluation, owner-occupiers paid an average of half a million euros for a property in the first quarter, so the higher equity share is reflected in 32,000 euros. For owner-occupiers, the purchase prices in the first quarter fell quite significantly by a good six percent compared to the fourth quarter of 2022, said Benjamin Papo, CEO of Hüttig & Rompf. Investors bought according to information for 321,000 euros on average.
Borrowers repay more slowly
Despite falling prices, the monthly burden for new loans has risen year-on-year – by 18.5 percent for owner-occupiers to an average of EUR 1,841 and for investors by 13.5 percent to EUR 1,199. The reason for this is the building interest, which almost quadrupled last year for ten-year loans and was recently around 3.8 percent. In addition, the requirements of banks have increased: They often check loan applications more critically.
According to Hüttig & Rompf, borrowers switched to shorter maturities in order to reduce the financial burden. “When it comes to credit terms, attention is currently paid to the decimal places.” At the beginning of 2022, 60 percent of owner-occupiers had chosen a fixed interest rate of at least 15 years, compared to 43 percent most recently. The proportion of loans with a ten-year fixed interest rate has grown to 46 percent – “although the effective interest rate can currently be saved in this way by just 0.2 percentage points,” states Hüttig & Rompf.
Borrowers also repaid more slowly. The average repayment rate for owner-occupiers has fallen from 2.58 percent at the beginning of 2022 to 2.16 percent most recently. Although this reduces the monthly burden, Hüttig & Rompf calculates that the repayment period is extended by almost three years under the same conditions.
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