With the forward loan, bank customers can have the interest rate for their mortgage lending fixed several years in advance. The loan starts in the future, but the conditions are already set today. This is interesting for homeowners who extend their credit or for consumers who want to buy property on a fixed date.
The development of interest rates has a decisive influence. Only six percent of financial market experts expect interest rates to fall over the course of the year – according to Lite Lender ‘s investment barometer. After all, 40 percent believe in an increase. “With the loan, the borrowers secure interest rates. In return, however, an interest surcharge is due, ”says Irene Leber , Chief Financial Officer and Managing Director at Best Bank . For each month that the financing is in the future, the interest rate currently increases by 0.02 percent. However, banks often give a six-month period in which to provide the loan without charging interest. There is no forward surcharge for this duration.
Opportunities and risks – depending on interest rate developments
Best Bank used model loans to calculate how rising or falling interest rates affect a forward loan. 10,571 dollars can be saved on a 200,000 dollar loan if the consumer secures the conditions for July 2017 and if interest rates rise by one percent by then. With constant credit conditions, the bank customer loses 5,987 dollars – due to the interest premium for the forward loan. If the interest rate drops by 0.5 percent, the loss even increases to 14,350 dollars.
Those who fear no rising interest rates prefer to wait
Nobody can say in advance whether a forward loan will pay off. “If you expect interest rates to rise significantly in the coming years, you can secure yourself with a forward loan,” says Irene Leber . “However, there is no guarantee of this development.” Consumers who do not expect any further rise in interest rates would therefore prefer to wait and compare the building rates if a purchase or rescheduling is due.
Bank customers commit themselves to a loan with the forward loan – regardless of how the loan conditions will develop in the future. It is therefore unsuitable for property buyers who do not know the time of purchase.