The building interest climb upwards – in contrast to the loan interest of the building society. Are home loan and savings contracts therefore rightly on the verge of a new boom?
Interest rates are gradually rising. This pleases savers, but it will be an expensive affair for all those who want to finance their own home with a construction loan. The average interest rate for a bank loan with a term of ten years has tripled at the beginning of the year from less than one percent to almost three percent interest per year in the meantime.
Because the interest rate trend could continue, many people are turning back to the long-depreciated home savings contract. Because the interest on loans from building societies has remained unchanged compared to the previous year, usually at 1.5 to 2.5 percent. Whoever concludes a home savings contract today will still have these interest rates in five or ten years.
There were almost 24 million home savings contracts in Germany in 2021. According to Christian König from the Association of Private Building Societies, the number of new contracts in the industry last year was 1.4 million – and this year many more were added. “Since mid-March we have seen a significant increase in demand – most recently with an increase in new business of over 50 percent,” he says.
But is it really worth concluding a home savings contract now? Important to know: A home savings contract basically consists of two phases. In the savings phase, you pay in an agreed amount each month. Interest is paid on the balance. Once a certain amount has been reached, the contract becomes ready for allocation. Then you can withdraw the money.
At the same time, the financing phase begins: savers are now entitled to a cheap loan. The conditions for this were agreed with the building society before the savings phase. With this you can now buy or build a property.
“The contract is profitable as a savings contract if the interest credited in the savings phase is attractive after deducting the costs,” says Roland Stecher from the Bremen consumer center. According to him, interest on credit balances is currently reported at around 0.01 percent, which is unprofitable in view of the slowly rising interest rates.
Whether a home savings contract is advantageous in the loan phase depends on the loan interest rate of the home savings contract compared to the then generally customary loan interest rate. And that cannot be foreseen at all when the building savings contract is concluded. If, for example, an employee savings bonus or a housing construction bonus is added to smaller building savings sums, there is a chance of a return.
From Christian König’s point of view, a home savings contract can definitely be worthwhile. This applies to current construction or purchase plans as well as to future financing projects, because the building savings contract secures long-term interest rates.
A home savings contract can also be beneficial for smaller modernization projects. “Due to the exploding energy prices, energetic refurbishments pay off more quickly,” says König. The building societies thus received an additional impetus. You could grant loans of up to 50,000 euros as a blank loan – without the cost of entry in the land register and notary. This sum covers a large part of the typical energy-saving investments.
Bausparkassen also did not demand so-called small loan surcharges, as is usual with banks. The first building societies are already on the market with extra climate protection tariffs. These include tariff variants especially for energy modernization with an interest advantage of around 0.15 percentage points or with a climate bonus in the form of reimbursement of the transaction fee of up to 300 euros.
Speaking of the closing fee: It is precisely this factor that generally speaks against a home loan and savings contract. “Building and loan associations demand transaction fees of between 1 and 1.6 percent of the savings amount,” says consumer advocate Stecher. With a home savings sum of 100,000 euros, that alone would be 1,000 to 1,600 euros, plus the annual account management fees.
In general, the currently low interest rates on a home savings contract seem to make possible financing with home savings attractive at first glance. However, it is important to carefully compare home savings contracts with annuity loans. Interested parties should calculate the alternatives carefully and seek objective advice – for example from a consumer advice centre. “That helps to save costs and to achieve the best individual solution,” says Roland Stecher.
There is no blanket recommendation, as nobody knows how interest rates will develop in the future. According to Stecher, an annuity loan often scores points compared to a home savings contract with lower overall costs. “For larger sums, an annuity loan with a long fixed interest rate is at least a good option.”
