Mortgage interest rates falling amid banking sector unrest

The turmoil surrounding failed banks in the United States, new trouble at Deutsche Bank in Germany, and the bailout of Credit Suisse in Switzerland are giving potential homebuyers an advantage. Mortgage interest rates have fallen remarkably fast as a result of the recent banking sector problems, De Hypotheekshop noted.

The mortgage advisor organization said that the last week showed one of the most significant declines in the past nineteen years. Mortgage interest rates fell by about 0.2 to 0.3 percentage points this week, according to De Hypotheekshop. It is the fifth-sharpest weekly decline since 2004.

In uncertain times, investors often put their money in government bonds, which are seen as a relatively safe investment. This increases the value of the bonds, leading to interest rates falling. As a result, capital market interest rates also started to fall two weeks ago, and mortgage interest rates are linked to this.

De Hypotheekshop observed that banks and insurers have been rather quick to pass on the fall in market interest rates to mortgage interest rates. Normally that takes a few weeks, but this time some lenders responded within a few days.

This has to do with the fact that demand for mortgages has fallen sharply in the past year, so lenders are competing for an increasingly smaller group of potential customers, De Hypotheekshop said.