Fear of recession pushing mortgage interest rates higher again

After a short break in July and August, mortgage interest rates will continue to increase at full speed from September, according to the Hypotheekshop. Interest rate hikes by the ECB and Fed central banks sparked by recession concerns, the depreciation of the British pound, and the likely sabotage of the Nordstream pipeline are pushing capital market interest rates, which is the benchmark for mortgage interest.

This week, the 40 active money lenders in the Netherlands announced mortgage interest increases of as much as 0.4 to 0.7 percent, especially in the short and medium-term, the 5 to 10-year rates. Halfway through the week, with more announcements expected on Friday and Saturday, the Hypotheekshop recorded a record 55 mortgage interest increases, with some institutions increasing multiple times in the week.

“This week looks set to end with an interest rate above 4.4 percent. Last week the total average was still 4.10 percent,” the mortgage advisor said. “Incidentally, this week a year ago, the interest rate was at the lowest level ever at 1.42 percent.”

Because the medium-term mortgage rates are rising faster than the long-term rates, the differences between the two are getting smaller. At two lenders, the medium-term rates are now even higher than the long-term ones. Some economists believe that such an inverse interest rate structure is a harbinger of a recession, the Hypotheekshop said.

Usually, lenders charge a higher interest rate if they lend money for longer because the risk that inflation will affect the amount lent is greater with a longer interest period. The inverse interest rate shows that lenders expect the current high inflation to continue foursome time, and they, therefore, see a more significant risk of devaluation in the shorter term.