As a financial advisor, we regularly deal with real estate financing. Due to falling interest rates, it is still advisable to invest money in a property. Who plans this for his own future, should learn as quickly as possible, whether a loan can be applied for. This can be used for the construction, conversion or even the renovation of a property. Only very few “home builders” can completely forego debt financing. In most cases, this is only possible if there is an inheritance or gift. The financial spokeswoman for the German politician is currently working to ensure that those affected receive legal certainty about their lending opportunities as soon as possible.
- In March 2017, new credit guidelines for real estate financing will be adopted
- Lending should be fairer
- especially seniors and young families can benefit
- a fixed floor of equity is still under discussion
The granting of loans for real estate financing should be easier in the future. The Finance Committee of the tafederal parliament plans to adopt the rules on lending separately. For so far, these were part of the Financial Supervision Act. And this is not exactly known for its simple rules. Even for someone with specialist knowledge, the regulations of real estate financing contained therein are quite complicated.
Agreement on the new credit guidelines for real estate financing
In order to make it easier and quicker to award in the future, the Union and the SPD should finally reach an agreement. However, the fact that citizens would benefit from it is not the only incentive for politics. The financial supervisory authority Bafin will otherwise have quite extensive access rights to bank lending. This is a thorn in the side of the Union in particular.
The Union and the SPD also wish that as many citizens as possible benefit from credit. The new credit standards, which deal with the financing of residential real estate, should therefore be adopted in March 2017. Even the opposition supports this, which may mean a lot. The Greens titled the current situation as “clear”. Except for the agreement of some details, nothing stands in the way of the restructuring of the current guidelines.
It is therefore agreed that citizens should be able to obtain a loan more easily. This is especially true for the, usually rather disadvantaged groups of people. These include young families and seniors. So far, it was almost impossible for them to get a loan approved. Family planning is fundamental to the country’s future, which is why it should be supported. Due to the demographic change, however, there are more and more seniors. To severely penalize these in the case of credit transactions from the age of 50 years onwards seems to be no longer appropriate compared to the significantly increasing life expectancy.
Of course, in the future, the loans for real estate financing will not be given blue-eyed to people who are simply not creditworthy. That is also quite understandable. However, the assessment of when exactly one person is creditworthy should be changed. For example, young applicants should focus on the foreseeable and not current income. With the seniors the existing fortune is to find a larger consideration.
It is also important that transparency for customers should also be increased. Because often the concrete credit conditions are difficult to see through, if the customer is not a specialist. As a financial advisor, I have repeatedly experienced the case that customers have taken out residual debt insurance with their credit, without noticing. However, this was rarely due to an ill-considered conclusion of the customer’s contract, but to the intentional non-transparency of the contract. Therefore, such by-products should be severely restricted with the new regulations. This allows the customer to save money again.
New regulations are intended to protect borrowers in real estate financing
In order for citizens to actually benefit from these benefits in the near future, however, there must be a final agreement between the SPD and the Union. Both sides, however, are optimistic. Finally, the growing housing shortage is a major problem. This could be solved by better regulation of real estate financing.
The reason that no final settlement has yet been made is also because the Federal Ministry of Finance would like to introduce a debt ceiling. Also targets for the repayment and a certain relationship between income and debt should be given. In my view, these are quite sensible arrangements. These should eventually protect the borrower. It is also by no means a groundbreaking new consideration. Already 15 countries have introduced similar regulations to prevent a second financial crisis. After all, it should not come back to risky real estate purchases, which are financed by loans that actually have no stock.
Germany is by no means a pioneer in this field. The term “latecomer” would rather meet.
The draft law underlines this once again, since these regulations are to be intervened only under certain conditions. For example, this would be the case if a real estate bubble threatens. Because in this case, the financial markets could collapse.
The core problem: the rising rents of real estate
Above all, better real estate financing should reduce the problem of ever-increasing rents. Because in the big cities rental prices are steadily increasing. Especially in Munich or Frankfurt, it has become almost impossible for low earners to find affordable housing. The reason for the constant increase is that more and more young people are moving to the big cities. As a result, the living space is scarce and the landlord can demand high rents due to the increasing demand. It will eventually find a tenant.
The current situation and the battle of the building societies
The building societies have been fighting for years with the low interest rates. Meanwhile, this is a real problem. Because Germany is no longer a “Bausparerland”. The interest has been fixed for years. This clearly distinguishes the Federal Republic from other EU countries. The customer must therefore expect only in the case of follow-up financing with higher interest rates. At least he benefits from this rule. Most customers also bring a lot of equity and tend to have long maturities with low interest rates. The Germans therefore like it for sure.
Much more, however, is not known about the behavior of German borrowers. It can even be spoken of a veritable “data gap”. This, in turn, is problematic because it is difficult to assess when intervention by the financial regulator would be useful. It is therefore not surprising that the desire for a unified register has been raised, which should hold exactly such information. The neobank was the largest representative of this concern. Because they could use the information provided to estimate risks very well. However, this is not content of the current draft law. This is probably the big influence of the banks. Because they see in such a register above all an immense bureaucratic effort. This in turn would prolong the granting of the loan and make it more financially expensive. The customer would suffer. Quite comprehensible arguments so not to create a uniform register.
As already mentioned, certain intrusion rights are to be attributed to financial supervision. However, these must be staked out even more precisely. The coalition is not yet in agreement on this point. Our foreign neighbors require a minimum amount of capital for the loan, which the borrower must bring with them. Otherwise, the loan can not be approved. Even in Germany, there is no longer a “100-percent financing” for a long time. However, there is still no specific regulation, which leaves the banks relatively much room for maneuver, which amount of equity capital they feel is sufficient for real estate financing.