2024-07-05 19:20:27
Installment loan interest rates have fallen to their lowest level in a year. This is shown by a recent analysis. And something else could boost the economy.
Installment loan interest rates fell to 6.75 percent in June. This is the lowest level in a year. Compared to the previous month of May, loan interest rates have fallen by 0.14 and by a total of 0.52 percentage points since December 2023. This is the result of a current analysis by the comparison portal Verivox.
Falling interest rates for consumer loans could not only ensure that Germans spend more again. A related side effect could also be a harbinger of an economic upturn.
The interest rates on installment loans taken out through Verivox fell to an average of 6.75 percent in June. In May, the average interest rate was 6.89 percent. The current interest rate level therefore represents a new one-year low.
The last time installment loan interest rates were lower was in June 2023. At that time, customers on the comparison portal took out their loans at an average interest rate of 6.70 percent.
In a long-term comparison, installment loans are currently still expensive. At their lowest point in February 2022, interest rates were less than half as high as they are today at 2.89 percent, and have risen continuously since then. For a typical loan of 15,000 euros with a term of five years, consumers had to pay a total of a good 1,500 euros less interest than would be due at the current interest rate of 6.75 percent.
But since the end of last year, the trend has been going in the other direction. “The days of rising interest rates are over. With the new one-year low, the trend of recent months in installment loan interest rates continues,” says financial expert and Verivox boss Oliver Maier. “On average, loans are now around seven percent cheaper than at the end of last year.”
However, it is not expected that installment loan interest rates will fall significantly more soon as a result of the latest cut in key interest rates. The central bank’s interest rate decision at the beginning of June was expected by the banks and has already been factored into their current conditions.
However, this also brings with it positive impulses for domestic demand and private consumption. Because of the lower interest rates, credit institutions can now relax their approval criteria for granting loans somewhat. This can already be observed at some banks.
“In conjunction with the lower interest rates of recent months, this means that consumers can once again more easily finance larger purchases and investments with a loan,” says Maier.
Whether interest rates will continue to fall in the future will also depend on how well the European Central Bank (ECB) makes progress in combating inflation. “Inflation has proven to be stubborn recently. The rise in the inflation rate in May has made a further cut in key interest rates in July less likely,” says Oliver Maier.
“In June, however, the price increase has now slowed down again. If the inflation rate continues to move towards the target of just under two percent, interest rates are also likely to fall further in the future.”
Anyone planning to make major purchases and no longer want to postpone financing should look for flexible repayment options when taking out a loan. Many banks now provide for free special repayments of any amount as standard in their loan agreements. Borrowers can then refinance their loan to a cheaper loan at any time and at no additional cost as soon as interest rates fall.