German real estate market faces pressure from rising mortgage rates

The German real estate market is facing significant shifts due to rising construction interest rates. In regions like Hamburg and Schleswig-Holstein, the GEWOS Institute anticipates a decrease in property transactions for 2026, particularly affecting single-family homes and residential land. While the Hamburg market saw an 11 percent increase in transactions in 2025, current interest rates for ten-year fixed-rate mortgages are hovering around 4.25 percent.

Homeowners who secured low-interest loans during the previous low-interest era are facing a critical period as those fixed terms expire. Model calculations from Finanztip and Verivox indicate that refinancing at current rates—often between 3.9 percent and 4.4 percent—could significantly increase monthly payments. For example, a borrower transitioning from a 1.14 percent rate to a 4.09 percent rate could see monthly installments rise by approximately 383 euros.

To mitigate these costs, experts suggest that homeowners avoid automatically renewing with their current banks and instead compare offers, which could potentially save up to 10,000 euros in interest costs. Meanwhile, the luxury real estate segment in Hamburg has seen a decline in average price per square meter, reaching its lowest level since 2020.