Building interest rates 2025: development

How are construction interest rates currently developing and what does this mean for your real estate financing? Many prospective buyers, sellers and borrowers in Germany are asking themselves this question. Building interest rates are currently moving in a volatile, moderate environment with a slight upward trend - but experts expect stability above all in the near future. Find out here what opportunities and risks the current conditions entail, which financing models make sense and whether now is the right time to buy.

Current building interest rate trend in mid-2025: stability at moderate levels

The average building interest rate for a ten-year fixed interest rate in July 2025 is around 3.57%, and around 3.7% for 15 years. This means that interest rates are slightly above last year's level, but still within a manageable corridor. Despite minor fluctuations, interest rates have been moving sideways for months, which is mainly due to the ongoing monetary policy of the European Central Bank (ECB) with a key interest rate of currently 2.65% and moderate inflation of around 2.2%.

Main factors behind the interest rate trend

• ECB monetary policy: The aim is to control inflation, which is currently being achieved with moderate success.
• Market yields on German securities (Pfandbriefe, government bonds): These serve as a direct reference point for building interest rates.
• Inflation rate: Falling inflation rates are expected to ease in the medium term, while rising inflation will put pressure on interest rates.

Despite the slight rise in interest rates compared to 2024, extreme jumps are currently unlikely. However, market participants must continue to expect short-term fluctuations triggered by economic or political events.

What do experts expect for construction interest rates until the end of 2025 and beyond?

Market analysts and financial institutions expect interest rates to remain in a range of around 3.25% to 4.0% until the end of 2025. Large jumps in interest rates are considered unlikely, as the ECB is focusing on stability with its policy and the inflation rate is settling at a moderate level.

Forecast for 2026

Many experts anticipate possible interest rate cuts from 2026, especially if inflation continues to fall and the ECB loosens its monetary policy. However, a significant fall in construction interest rates is not expected, as interest rates depend not only on central bank policy but also on risk premiums.

Conservative planning therefore recommends using the current conditions as a basis for secure financing without speculating on low interest rates.

Focus on financing strategies: Longer fixed interest rates and flexible models

Longer fixed interest rates - how you can save costs in the long term

Today, a long fixed interest rate period (15 years or more) offers important security to protect against possible future interest rate increases. Although the interest rate for a 15-year fixed rate is usually slightly higher than for shorter terms - currently around 0.2 to 0.3 percentage points - this surcharge can definitely pay off in the long term.

Why?

• Planning security: The monthly charge remains constant over many years, eliminating the risk of interest rate increases.
• Avoid follow-up financing: If the loan is repaid in full within the fixed-interest period through a high repayment ("full repayment loan"), follow-up financing becomes superfluous - often with significant savings in interest costs.
• There is no risk of an interest rate increase for follow-up loans: an interest rate increase of just one percent can result in additional costs in the five or six-figure range.
  
  

Risks of long fixed interest rates

• Opportunity costs: If construction interest rates fall significantly in the future, the fixed, higher interest rate leads to additional costs compared to short-term or variable-rate financing.
• Loss of flexibility: Early termination or debt rescheduling is often associated with early repayment penalties.
• Budget risk: In the event of a fall in income, the usually fixed installments remain unchanged.

Variable interest rates and graduated models: scope for expected interest rate reductions

For property buyers who expect interest rates to fall from 2026 and have a flexible income situation, variable or graduated financing models can be interesting options.

• Variable loans adjust to standard market interest rate changes and do not have any notice periods, but installments can rise quickly if interest rates rise unexpectedly.
• Graduated models combine the advantages of fixed interest rates in the initial phase (e.g. 5 years fixed interest rate) with the option of switching to favorable variable interest rates at a later date. In this way, interest rate stability is used in the short to medium term, but the advantage of possible interest rate reductions is retained in the long term.

These models require a precise assessment of personal risk tolerance and the household budget.

Should I buy now or wait and see?

The question of the 'right time' concerns many prospective buyers. The current market situation offers a comparatively favorable combination of moderate building interest rates and, in some cases, lower property prices compared to the peak years before.

Important to bear in mind:

• By waiting too long, possible interest rate reductions could be offset or overcompensated by rising real estate prices, increases in construction costs and inflation.
• Currently, the market still allows for solid cost planning with long-term fixed interest rates in some cases.

We generally recommend that decisions are not made on the basis of speculation, but that purchases are approached with sound planning and a personal risk assessment.

Regional differences in building interest rates and conditions in Germany

While building interest rates are in line with the national average, the effective costs and access requirements vary according to regional factors:

• Loan-to-value ratios: These are often lower in structurally weaker regions, which can result in higher interest rates due to lower loan security.
• Bank structure: Regional banks occasionally offer more favorable marginal conditions; in economically strong federal states such as Bavaria or Baden-Württemberg, these are often more attractive than in other regions.
• Subsidy programs: Different municipalities and federal states contribute discounted loans or interest subsidies via KfW programs, regional housing initiatives and the like.

If you want to finance a property in a particular region, you should therefore include the regional conditions in your financial planning.

Applying for construction financing: What documents are required?

Early and careful preparation for construction financing makes it easier to take advantage of favorable conditions and creates room for negotiation with the bank.

Important documents:

• Proof of salary for the last 3 months
• Current SCHUFA information or self-disclosure
• Land register extract of the property
• Building description or exposé for new build or purchase
• Proof of available equity capital
• Bank statements for financial overview

Make sure you have complete and up-to-date documents so that the financing can be checked quickly.

Note: We do not offer legal advice. For questions regarding the legal construction financing process, we recommend seeking advice from specialized lawyers or notaries.

Conclusion: Security, flexibility and individual advice are now crucial

The construction interest rate landscape in Germany is stable in a moderate interest rate corridor in 2025 - a rare opportunity to achieve planning security. Those who calculate for the long term will currently find attractive interest rate conditions with a longer commitment period. For risk-conscious investors and buyers who expect interest rates to fall from 2026, flexible models such as graduated financing can be a sensible option.

Ultimately, the individual financial situation, risk appetite and regional environment will determine the best possible strategy.

The independent real estate professionals at Von Poll Immobilien GmbH will provide you with expert support when buying, selling and financing your property. For a tailor-made financing solution, we recommend our partners at Poll Finance - your best contacts for all aspects of construction financing.

Request a consultation now and secure your real estate plans!