Real Estate | Opinion
The European Commission has not prohibited termination restrictions for fixed-rate mortgage loans. That's a good thing because these loans are the basis for the stability of the German property market.
Guest Commentary by Jürgen F. Kelber, Conwert
Jurgen Kelber-133x150 in funding: Not shaking at the broker base for sale to the market
Jürgen F. Kelber, Conwert
German banks have to retain the possibility to demand compensation from their clients if they pay off a fixed rate real estate loans early. This is good for the German property market and ensures its much vaunted Stability: According to a study by the Center for European Economic Development, the German real estate market have been spared main reason of the impact of the crisis, because the proportion of fixed-rate real estate loans in Germany significantly by 85 percent over the European average.
Sure, for individual borrowers in Germany it is quite painful when they have to pay the bank the so-called prepayment penalty for the lost interest income. Mainly because they often pay too much: While the calculation of damages for the bank is theoretically simple - it consists of the difference between the interest that would have occupied the bench during the continuation of the loan, and those who at termination and re-investment would get back the amount paid, plus processing fee. In practice, however, was almost half of the 200 false invoices, which has controlled the Consumer Bremen in the first half of 2009.
The practice shows, however: It got experience, only relatively few borrowers in an economic situation where the sale of a long-term mortgage is economically useful or necessary. Under a ban on all future payments would, however, suffer from mortgage borrowers. Because for one price in the German banks certainly possible yield losses on lending would be with. This means that the cost of long term fixed rate mortgages would rise considerably. Second, the compensation is an important prerequisite for the relatively wide range of fixed-rate mortgage loans in Germany. Only when the banks receive a premature termination of a compensation for lost interest income, pays for them with the business building loans with fixed interest rate and a term of ten years or more. Compensation falls away, goes back to the offer such products. That is, there are more loans with variable interest rates on the market.
