High interest rates are slowing down consumers
No recovery in sight on the real estate market
Updated February 4, 2026 – 4:42 p.mReading time: 2 minutes
The short recovery in the housing market is shaky. New figures show why the dream of owning a home is once again stalling.
Increased interest rates are making property buyers and developers shy away from new loans. While consumers had taken out significantly more real estate loans at the beginning of 2025, the recovery is now ebbing. This is shown by figures from the analysis company Barkow Consulting, which are based on data from the European Central Bank (ECB).
Accordingly, German banks granted new loans totaling 59.2 billion euros to private households and the self-employed in the fourth quarter of 2025. This was the weakest quarter in the past year. The slowdown that was already apparent in the spring has continued, new business has stagnated for the third quarter in a row, wrote managing director Peter Barkow.
From his point of view, consumers are in a dilemma: On the one hand, building interest rates have risen. At the end of 2025 they would have reached their highest level in more than two years – with an average of 3.9 percent for loans with a ten-year term. At the same time, real estate prices are stable to slightly increasing. “The time for bargain hunters on the housing market is over,” said Barkow.
The Frankfurt-based FMH financial consultancy currently sees building interest rates in a range between 3.75 and 4 percent – in the summer of 2025 it was 3.6 percent. Since property buyers and builders often take out hundreds of thousands of euros in loans, even small interest rate movements become expensive. No major changes are currently expected, wrote FMH expert Max Herbst.
New business with private construction financing boomed until spring 2022, then a sharp rise in interest rates in the wake of Russia’s war of aggression against Ukraine put an end to the boom. Since construction costs also rose sharply, many people gave up their plans to build a house or buy real estate. The market then recovered. This also helps new business with construction loans: Thanks to the strong start to the year, this grew in 2025 by a good fifth compared to the previous year to 241 billion euros, according to Barkow Consulting. But old records are out of reach.
The ECB’s key interest rates are at a moderate level. But the prospect of billions in federal debt has caused capital market interest rates to rise, which is affecting interest rates for private home builders and large investors. From the point of view of many experts, a new real estate boom like that seen in the years up to 2022 is therefore not to be expected.
