MORTGAGE borrowing costs in Germany have surged in recent months to hit the highest level in a decade as the European Central Bank (ECB) raises interest rates.

The cost of borrowing to buy real estate hit 3.03 per cent in September, according to ECB data published on Thursday (Nov 3). That rate is among the highest in the euro area and has more than doubled from a year earlier, when Germany was one the cheapest places in the region to get a mortgage.

The dramatic rise comes on the back of several ECB hikes in interest rates – now at the highest level since 2009 – to stem surging inflation. The central bank has said that it’s likely to continue tightening at its next monetary policy meeting.

The soaring borrowing costs have sapped demand for loans to buy homes. The metric dropped by 42 per cent in the third quarter, according to the ECB’s latest Bank Lending Survey published last month. That’s the biggest single drop seen since 2012 aside from a more pronounced decline two years ago, when the economy was frozen by the pandemic.

The drop in demand was “particularly pronounced” in Germany, the ECB said in the release in October. BLOOMBERG