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Banks recognize a need for long term fixed interest rates
When preparing a tender for the construction financing banks mostly fall back on relatively short interest rates. Especially 10-year fixed interest rates are offered very frequently or even recommended to the customer. In direct connection is made to the low interest rates: Who chooses a short fixation benefits from an interest rate advantage.

However, many private borrowers are better off if they choose a long fixation. Because historically, mortgage rates are extremely favorable. Accordingly, it is advisable to lay down the low interest rate for a longer period. Thus, a security interest be obtained, their significance should not be underestimated: If the interest rate markets tighten again, one is a clear advantage. The threat of a rise in interest rates may harm borrowers as nothing because they benefited quite a few years by the attractive terms.

For most banks, however, is at fixed interest rates of 15 or 20 years from the end. Only rarely, longer fixed interest rates can be selected. Commerzbank, for example, one of the few that allows for quite some time as 30-year interest rates. Fortunately, more banks are recognizing the trend and clear their customers the option to choose a longer fixed interest rates. As the financial magazine “online stock exchange” writes, some banks have followed suit. Are nowadays also offers the Munich-based mortgage company can sign 30-year interest rates. With the alliance, the Debeka and Hannoversche life, there are three other providers of real estate loans that have recognized the trend to the long fixation. Interest rate maturities of 30 years are not specifically offered, but at least it’s possible to write the mortgage interest for the period of 25 years.

Update 28 October 2010: Commerzbank offers real estate loans with a 30-year fixed interest rate for some time no longer. Currently there fixed interest rates of up to 20 years are available.

In the current very low mortgage rates, it is useful to close loans with a fixed interest rate as long as possible. The classical rate fixation period of 10 years applies only in a few cases, as recommended. Most borrowers will need more time to repay their loans in full. Because the probability that in 10 years are higher interest rates, measured relatively high, it simply makes sense to choose a longer fixed interest rate. Especially since the design is relatively simple: More and more banks are starting to offer fixed interest rates of 20 or even 25 years.

Prospective borrowers are careful though. Often they dare not approach these fixed interest rates. In essence, two arguments are listed. First, reference is made to the interest rate advantage that comes a brief fixation with it. The truth is: shorter fixed interest rates actually lead to lower interest rate. However, the risk of short interest commitments may not be disregarded. If you already have a second mortgage is due in 10 years and then interest rates have risen to only around one percent, the total funding significantly more expensive. They also argued that interest rates rise much more clearly, so that some borrowers may no longer are able to lift their funding.

The second reason, the possibility is mentioned that the mortgage rates in 10 or 25 years could be less expensive. This possibility is certainly, is thought to be unlikely. It also means a long fixed-interest not to use this opportunity can not. Each borrower has the option to get off a loan after 10 years of operation – that is guaranteed by a statutory right to cancel.

Consequently, it should in most cases simply make more sense to opt for a long fixation. The high level of security by the long-term interest rate advantage speaks for itself – especially since the law provides for early termination for sufficient flexibility.