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What actually happens to the loan interest after the agreed fixed interest rate?

7. October 2023

Fixed interest rate: What is that?

When taking out a loan, in addition to the actual loan amount, you always think about the agreed interest rate and the term. The interest rate can be fixed or variable. In order to have a certain security, especially with a fixed interest rate, this is usually guaranteed by the bank for a certain period of time, but after this time the so-called fixed interest rate ends and the interest rate must be renego­tiated again, provided that the loan capital itself has not been fully repaid by then.

What many people do not know, however: With the setting of the new interest rate the bank has by no means free discretion, but is subject after the juris­diction to strict rules, explains attorney Sascha C. Fürstenow.

Which are those and which you can do, if your bank does not keep to it, the following legal advice is to point out.

Deter­mi­nation of the new interest rate after the end of the fixed interest period

In order to under­stand what the default of the agreement of new interest rates is based on, it is necessary to know first of all that there are two types of interest rates: The contractual interest rate agreed individ­ually between the bank and the customer and the so-called reference interest rate, which is provided by a neutral body, publicly available, to the banks for the calcu­lation of the variable interest rate. The gap between the agreed interest rate and the reference interest rate is called the equiv­a­lence gap.

According to BGH case law, these values must be used directly when calcu­lating the new interest rate. The currently reported reference interest rate is taken as the basis and the equiv­a­lence gap is added up. This then results in the new interest rate. An increase above this is therefore not permitted and protects the customer in particular from so-called “bait offers” with low interest rates. The borrower can also decide how long this new interest rate should now apply to her. However this, as long as the actual credit is still valid, cannot change also into a completely different, more favorable interest rate. Thus, both the borrower, but also the lender in a certain way limits have been set.

However, this decision can of course be applied not only to the upward adjustment of interest rates, but also in principle to the downward adjustment, i.e. in favor of the borrower; if the reference interest rate has thus fallen in the meantime since the loan was taken out. According to the principle of the BGH, the initial equiv­a­lence gap should always be maintained. Interest rate reduc­tions in the reference interest rate would thus also have to be passed on to the bank customer after the fixed interest rate period has expired, but this is probably rarely the case in practice. In this case, there could be a claim for an interest rate adjustment, which would be best checked by a lawyer.


Interest rate adjustment clauses

If a bank’s general terms and condi­tions also contain so-called “interest rate adjustment clauses” that basically give the bank a free hand in setting the interest rate within the contractual relationship, these are also illegal according to BGH rulings.

If, on the other hand, they contain an adjustment threshold at which a change in the interest rate can be made from a certain change in the reference interest rate, as well as a subse­quent review period, they withstand validity according to case law, on the other hand, since the bank precisely cannot act at its own discretion and this can be in the interest of both contracting parties, but does not have to be. It can also be agreed directly that any change in the reference interest rate leads directly to a change in the agreed interest rate. According to the BGH, this is also lawful.

It is worth­while itself therefore to examine your credit agreement also in detail for possibly ineffective clauses, so attorney Fürstenow. An ineffec­tiveness of the clause leads first to a pure omission of this from the contractual relationship, i.e. one must renego­tiate the interest after­wards, naturally in the context of the condi­tions already pointed out here.



Both the interest rate adjustment clauses and the pure negoti­ation or deter­mi­nation of a new interest rate after expiration of the agreed term have in the past often been subject to provi­sions that are actually inadmis­sible for the consumer. It is therefore definitely worth taking a closer look at the agree­ments made and the loan agreement. In particular, the passing on of a lower reference interest rate to customers has probably only rarely been done in practice. In addition, you should always be aware of the legal agree­ments in the event of an imminent end to the previous fixed interest rate, in order to avoid a subse­quent, actually inadmis­sible, exces­sively high interest rate. Due to the complexity, but never­theless great relevance, of the topic, this legal advice can of course only give a small overview of the problem; an individual case exami­nation is therefore essential in any case in order to be able to determine possible claims.

Do you have further questions on this topic or would you like further legal advice? Attorney Sascha C Fürstenow will be happy to do this for you!