Both instruments are oriented around indicators that banks use to assess creditworthiness in order to prevent borrowers from taking on excessive debt. [4] Both instruments likewise feature in the recommendations proposed by the ESRB and the German FSC for the German residential real estate market. 3 Interest rate risk The German financial system remains vulnerable to an abrupt rise in interest rates.
Many institutions have increased the interest rate fixation periods of their assets, not least to stabilise their interest income. For instance, the share of new loans for house purchase with an interest rate lock-in period of more than ten years has risen from 26% in 2010 to its current level of 50%.