Mortgage interests stabilizing; Decrease possible

After months of rising, mortgage rates appear to be stabilizing. A decrease may be possible soon, analysts said to NOS.

In September last year, mortgage interest rates reached their lowest point at 1 percent. Since then, the interest has been rising again. Currently, it’s 3.6 percent for a ten-year term with National Mortgage Guarantee.

According to Oscar Noorlag of Van Bruggen Adviesgroep, the mortgage interest rate stabilized because the capital market interest rate fell sharply in the past two months. This rate rose in the first months of the year due to the war in Ukraine, high energy prices, inflation, and inflation expectations. “In those uncertain moments, you see the market overshoot and interest rates rise.” Capital market interest rates are now falling again because inflation is high, and investors have become more cautious for fear of a recession.

Noorlag expects mortgage interest rates to decrease shortly. He is actually surprised that it isn’t happening already, along with the capital market interest rates. “That is normally the case, but not now. In theory, the mortgage interest rate could be 1 percent lower than it is now.”

He thinks money lenders like the lower capital market rates and higher mortgage rates. “Higher margins mean higher profits. Only when large parties decide to lower interest rates will the rest join in,” he said. Tight summer schedules may also play a role because a decrease in interest rates usually means an increase in mortgage applications.

ING, Rabobank, and ABN Amro - the three largest mortgage providers in the Netherlands - told NOS that capacity is not an issue. ABN Amro economist Philip Bokeloh said the bank has already worked through its previous backlog, and the number of applications has now fallen considerably. Margins are somewhat larger now, he said, but they were tighter in the preceding months due to the rapidly rising interest rates. “You have to see it as recovery.”

According to Bokeloh, providers are being extra cautious because of the severe fluctuations. “The costs for banks have increased. We do not lend all our money. Part of it is equity. The costs of this have also increased, as have our risk premiums.” But he expects that capital market interest rates and mortgage interest rates will creep closer together eventually.

A Rabobank spokesperson gave a similar statement. “Margins on mortgages have been under pressure for some time due to rapidly rising mortgage costs. Due to the fall in capital interest, those margins are back to normal.”

Carina Kloet of mediator De Hypotheker expects an imminent decline in mortgage interest rates. “We saw rapid increases this year but decreases often go slower. If there is a lot of uncertainty about whether people can pay their mortgages, due to high inflation, for example, mortgage lenders often build in higher margins,” she said. “We expect competition between lenders to increase because of the declining mortgage market. As a result, interest rates may fall again.”