Buying a home in Germany is now noticeably more affordable than it was two to three years ago, in the period following the interest rate turnaround in 2022. This is the conclusion of the study “vdp Spotlight: Structures of Residential Property Financing 2025,” which was compiled by the Association of German Pfandbrief Banks (vdp) and published on November 4, 2025. It is part of a series of regular surveys in which the vdp analyzes the structure of financing for owner-occupied homes and condominiums based on data from its member institutions.
The industry association sees the main reasons for the improved affordability as being, on the one hand, the positive income development and, on the other hand, the stable financing conditions. “The residential real estate market continues to recover from the abrupt interest rate turnaround in 2022. Since mid-2024, prices and financing volumes have been on the rise again – in small steps, but continuously. Real incomes are rising, and the phase of interest rate hikes is over for the time being. This means that buying a home is more affordable today than it was two to three years ago,” says vdp CEO Jens Tolckmitt, summarizing the current market situation. In addition, rents for new leases have risen steadily as a result of the tight housing market. As the rental housing market continues to tighten, buying a home is becoming more attractive again, which is reflected in rising demand for loans.
According to the vdp study, the average interest rate for residential real estate financing fell from 3.96 percent to 3.50 percent between 2023 and 2025, while the average loan-to-value ratio rose only minimally from 26.2 percent to 26.7 percent over the past two years. The average loan term increased moderately from 26.6 years to 28.1 years. In addition, it was found that real estate buyers continue to predominantly choose long-term fixed interest rates; the average fixed interest period was most recently twelve years.
After a decline from 80 percent to 76 percent between 2021 and 2023, the vdp now expects the average ratio of borrowed funds to purchase price to rise again to around 83 percent, pointing out that this level is determined not least by high ancillary purchase costs. Since these must be financed from own funds, a higher real estate transfer tax, for example, reduces the maximum share of own funds that buyers can contribute to the actual real estate financing. In return, the debt ratio increases.
Thomas Hofer, Head of Domestic Real Estate Market and Real Estate Financing at vdp – and author of the study – said: “In order to reduce the financial burden on private households and thus facilitate access to home ownership, it would make sense to reduce the real estate transfer tax, especially for owner-occupiers. This would significantly reduce the need for external financing when purchasing real estate, which would particularly benefit young families.” Hofer also pointed out that banks attach great importance to appropriate equity investment and sufficient financial capacity on the part of borrowers.
“The high real estate transfer tax in Germany has become an increasing burden on home ownership due to rising property prices. The FDP is rightly calling for an allowance of €500,000 for the purchase of a first home for personal use, and the Union parties have proposed allowances for adults and children. Unfortunately, however, the issue was left out of the coalition agreement between the CDU/CSU and SPD,“ says Jacopo Mingazzini, CEO of The Grounds. ”Anyone who is serious about promoting home ownership should continue to work consistently toward reducing the real estate transfer tax burden on the purchase of owner-occupied condominiums or houses.”
