Building interest rates 2025 - current status and forecasts

Building interest rates in Germany have settled at a stable but challenging level in 2025.
Anyone planning to finance a property or follow-up financing should be aware of the current market situation and the most important influencing factors.
This article summarizes current developments, expert forecasts and specific recommendations for action.

Current status of building interest rates in 2025

According to data from Interhyp and Dr. Klein, interest rates for ten-year loans are currently in the range of around 3.4 to 3.9 percent.
Some banks are still offering rates of just under 3.5 percent for very good creditworthiness and low loan-to-value ratios.
This means that interest rates have largely stabilized since the summer, following significant fluctuations in previous years.

• 10-year fixed interest rate: approx. 3.6% p.a.
• 15-year fixed interest rate: approx. 3.9% p.a.
• 20-year fixed interest rate: approx. 4.0% p.a.
  
  

Factors influencing the interest rate trend

Building interest rates are strongly influenced by macroeconomic conditions.
The following factors currently play the biggest role:

1) Monetary policy of the European Central Bank (ECB)

After several key interest rate hikes, the ECB is currently keeping the deposit rate stable at 2.0%.
A reduction in the near future is unlikely, which argues for stable or slightly rising interest rates in the short term

2) Capital market and yields on German government bonds

Long-term mortgage interest rates are based on the development of the ten-year German government bond.
If their yields rise, banks usually react with higher financing costs.

3) Inflation and economic expectations

Persistently higher inflation forces central banks to adopt a more restrictive monetary policy.
At the same time, weaker economic data influences the risk premiums that banks include in their calculations.

4) Creditworthiness and equity ratio

Individual creditworthiness, loan-to-value ratio and equity ratio also determine the personal interest rate.
Solid financing with 20-30% equity reduces the risk for the bank and leads to more favorable conditions.

Interest rate forecast for the coming months

The majority of market analysts expect interest rates to move sideways in the short term.
However, interest rates could rise slightly in the course of 2025 if inflation remains at a high level and capital market yields continue to rise.

• Short term (1-3 months): stable to slightly rising interest rates of around 3.5%
• Medium-term (6-12 months): Trend towards 3.8-4.0%
• Long term (> 12 months): persistently high interest rates - decline unlikely
  
  

Conclusion of the experts: The phase of sharply falling interest rates is over for the time being.
A balance between security and flexibility is more important than ever.

Strategies for your real estate financing

1) Act now and secure interest rates

If you currently need financing, you should not speculate on more favorable conditions.
Forward loans or fixed interest rates secure current conditions for many years.

2) Increase equity

The lower the loan-to-value ratio, the more favorable the interest rates.
Just 5% more equity can significantly reduce financing costs.

3) Make a conscious choice of repayment

An initial repayment of 2-3% per year shortens the overall term and reduces the interest rate risk for follow-up financing.

4) Check long fixed interest rates

Longer fixed interest periods of 15 or 20 years provide planning security.
Despite slightly higher initial interest rates, this can be more favorable over the entire term.

5) Use unscheduled repayments and flexibility

Contracts with special repayment options or installment breaks increase the ability to adapt to changes in life or income.

Conclusion: Keep an eye on interest rates - take advantage of opportunities

Building interest rates are expected to remain at a medium but stable level in 2025.
Those who plan their financing strategically, use equity in a targeted manner and compare different providers
can achieve attractive conditions even in this environment.
Individual advice offers the best overview of all options - especially for follow-up or new construction financing.