Interest rate turnaround - Building society boom continues: but development is losing pace
Home loan and savings contracts are still very popular with people in Germany. For 2023, an increase of around 15 percent is expected - both in the number of new contracts and in the amount saved, said Bernd Hertweck, Chairman of the Board of the Association of Private Building Societies, to the German Press Agency.
Further growth at a high level
The institutions can therefore continue to grow at a high level - even if the pace of growth is slowing somewhat: In 2022, the private building societies had concluded around 895,000 contracts for a total of approximately 59.4 billion euros. In terms of volume, this corresponded to an increase of 47 percent compared to 2021, while the number of new contracts rose by 15 percent.
The Landesbausparkassen(LBS) did not yet have a forecast for 2023 as a whole. From January to September, however, the positive trend in new business also continued at the savings banks' building societies. According to their own figures, they concluded around 382,000 new home loan and savings contracts with a volume of 24.9 billion euros during this period. LBS Association Director Axel Guthmann put the increase in the number of contracts at 7.7 percent. The home loan savings volume increased by 4.4 percent - also compared to the same period last year. For 2022 as a whole, the growth in contracts and home loan and savings amounts was still well into double figures.
End of the ECB 's low interest rate policy drives business
The reasons for the boom in the financial product remain unchanged: "Building up equity in combination with interest rate hedging and provision for the heating turnaround were the key drivers of demand," said Hertweck, who is also CEO of Wüstenrot Bausparkasse.
Home loan and savings contracts are divided into two phases: Savers pay in money regularly in order to gain the right to a low-interest loan after a few years - this gives them planning security, for example for buying a home. They also receive interest on credit balances.
However, the low interest rate policy of the European Central Bank (ECB) following the financial crisis had put the building society sector's business under pressure for years. Favorable loans were no longer something special, but a matter of course. However, following the ECB's interest rate turnaround in mid-2022, real estate loans have become significantly more expensive - and demand for home loan and savings contracts has skyrocketed.
Demand remains high - also for energy-efficient renovations
The private institutions are cautiously optimistic about the outlook for 2024: due to the slight fall in real estate interest rates, they expect a sideways trend in the short term. Small setbacks are also possible in the medium term, said Hertweck. But: "I don't yet see the big downward turn in interest rates that some are already calling for. Building society savings remain attractive." The Landesbausparkassen take a somewhat more positive view of the future: they expect the current trend to continue in 2024, meaning that demand for home loan and savings contracts will remain high, they said.
The expected increase in demand for loans to finance energy-efficient renovations should also contribute to this. The renovation obligations in the EU are off the table, Guthmann said. "However, as heating will become significantly more expensive due to the rising price of CO2, the pressure to make your own four walls fit for energy efficiency will hardly diminish." A development that private individuals are also observing: "The home loan and savings contract is increasingly becoming an energy-saving contract," said Hertweck.
The state building societies account for around a third of the German market, with the rest shared by private institutions. The heartland of the sector is Baden-Württemberg. The four building societies in the south-west account for almost 60 percent of the market and represent more than 12 million customers. In addition to the industry leader Schwäbisch Hall, the largest German LBS - LBS Süd - as well as Wüstenrot and Deutsche Bausparkasse Badenia are based there.
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- Despite the increasing costs of real estate loans due to the ECB's interest rate turnaround, savings on home loan and savings contracts remain attractive for many individuals in Germany, according to Bernd Hertweck, Chairman of the Association of Private Building Societies.
- In Baden-Württemberg, the heartland of the sector, the four largest building societies - Schwäbisch Hall, LBS Süd, Wüstenrot, and Deutsche Bausparkasse Badenia - account for almost 60% of the market and serve over 12 million customers.
- The private building societies in Germany, including Landesbausparkassen (LBS), had concluded around 895,000 new home loan and savings contracts with a total volume of approximately 59.4 billion euros in 2022, representing a 47% increase in volume and a 15% increase in the number of new contracts compared to 2021.
- The sector's growth, however, is slowing down, as indicated by the downturn in new business in 2023 forecasts for Landesbausparkassen, which has only released data for the January to September period.
- The low-interest policy of the European Central Bank (ECB) had pressured the building society sector for years, but following the ECB's interest rate turnaround in mid-2022, real estate loans have become more expensive, leading to a surge in demand for home loan and savings contracts.
- In addition to buying homes, demand for energy-efficient renovations should also contribute to the continued growth of the building society sector in Germany, as energy costs rise and renewed focus on energy efficiency becomes a priority for many individuals.
Source: www.stern.de
