This December, ten-year mortgage loans in Germany have reached nearly 4% per annum, a significant increase compared to the 1% level during the pandemic. This trend is seen not only in Germany, but throughout Europe, where mortgage rates and housing prices are climbing despite central banks lowering benchmark rates.
The main reason is the rising yields on government bonds, as governments borrow more to fund programs. This forces banks to raise rates, placing an additional financial burden on ordinary homebuyers. At the same time, Europe faces a chronic shortage of new housing: construction cannot keep up with demand, which further drives prices up.
Housing prices in Germany have grown by 2% this year, while new buildings have become 2.3% more expensive. In many European countries, including Spain, the Netherlands, and Canada, further property price increases are expected. This creates difficult conditions for young families, teachers, and social workers who cannot afford to live in the cities where they work.
Governments are trying to support the population with subsidies and programs, but these measures mostly address symptoms rather than the root causes. The lack of balanced financing and the extensive use of cheap money during the pandemic have led to sustained increases in loan and property costs. Millions of people must now choose between buying property under current conditions or waiting, risking even higher prices in the future.
