Spike in mortgage interest rates likely: Rabobank

Mortgages will likely be much more expensive in the near future, warns Dutch retail bank Rabobank. The rates are expected to increase because of stricter government regulations, the firm's representative told Financieele Dagblad.

The mortgage rates will rise significantly in the coming years, and banks want to be able to earn money from real estate deals, says the financial and risk manager of Rabobank, Bert Bruggink in an interview.

Higher capital requirements force banks to relieve their balance sheets by selling parts of their mortgage portfolios to institutional investors, which will lead to higher mortgage rates, says Bruggink.

In the near future, Bruggink wants to adopt the American mortgage model in which the bank acts only as an intermediary between the customer and the lender in providing new mortgages. This would have an impact on the prices.

"Contrary to what many people think, the interest margins on banking products are, both for private and business customers, low. In the US they're twice as high, which makes sense because the lender also has to put food on the table," he said. From his perspective, the margins must rise higher for banks to continue to take a role in mortgage lending.

Rabobank will lose 200 billion euros from its mortgage book with the successive increases in the buffer requirements that force banks to hold more capital, Bruggink claims.