Installment loan interest rates have been rising continuously since the beginning of the year. In the course of the turnaround in interest rates, this development has now intensified again, reports the comparison portal Verivox.
On average, installment loans are 35 percent more expensive than at the beginning of the year, as an analysis by the comparison portal Verivox shows. According to the survey, the banks also expect interest rates to rise further in the coming weeks. They are also tightening the criteria for lending.
As a result of the interest rate hike by the European Central Bank (ECB), interest rates for installment loans have also risen significantly in recent months. On average, loans are 35 percent more expensive today compared to the beginning of the year. This is the result of a survey by Verivox, for which the comparison portal interviewed 13 lending banks and evaluated almost one million financing offers. In the cheapest market segment, interest rates are currently even 65 percent higher than in January. The majority of financial institutions therefore expect interest rates to rise in the coming months.
According to the Verivox survey, 12 out of 13 banks have increased their interest rates in the past three months, following the general market development: Compared to the beginning of the year, installment loan interest rates on the market have increased by around 1.8 percentage points from 4.98 percent to 6.72 percent gone up. This corresponds to an increase of 35 percent. According to Verivox calculations, the average interest rate actually concluded is currently 4.92 percent and is therefore still significantly lower than the average market interest rate. However, this was still 2.98 percent at the beginning of the year. As a result, loans in the low price segment, with the best credit rating, have become 65 percent more expensive, reports the comparison portal.
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“After years of downward slide, we are now experiencing an increase of historic proportions in installment loan interest rates,” says Oliver Maier, Managing Director of Verivox Finanzvergleich GmbH. “Of course, the latest central bank decisions play an important role. But long before the first key rate hike in July, the market had priced in the expected turnaround in interest rates.” Installment loan interest rates have continued to rise since the spring. “And there is no end in sight. Loans are likely to become more expensive in the coming weeks,” warns Maier.
The analysis by Verivox also shows that the majority of banks expect interest rates to rise further. 12 of the 13 financial institutions surveyed stated that they had increased their installment loan interest rates in the past three months. Eight credit institutions expect interest rates to continue to rise, three expect them to remain constant. Two banks did not provide any information on how conditions are likely to develop over the next three months. However, none of the institutions surveyed believed that interest rates could fall again in the near future.
In addition to the key rate hike by the ECB in July of this year, uncertainty about future economic developments is driving interest rates up further. In an impending recession, many people interested in credit could soon be threatened with job loss and loss of income, says Oliver Maier. “Many banks price this additional risk with an interest rate premium.” In addition, it is difficult to predict how much the inflation-related rising prices will put an additional strain on consumers’ household budgets in the future “and how much money will then still be available for the loan installment,” explains Oliver Maier .
Some of the banks surveyed are already reacting to this by tightening the guidelines for lending. Five of the banks surveyed by Verivox state that they now apply stricter allocation guidelines when checking creditworthiness. Three banks are expecting a tightening of the creditworthiness requirements for potential creditors in the next three months.
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