Homeowners face higher monthly payments as fixed-rate mortgages expire

Homeowners with mortgages from the past decade will see their monthly payments rise as their fixed-rate periods expire, following recent interest rate hikes. According to De Hypotheker, the effect is less severe than anticipated because the higher rates boost their mortgage tax deduction.

Interest rates were historically low between 2016 and 2021. Since then, the average ten-year mortgage rate without the National Mortgage Guarantee (NHG) has jumped over 3 percentage points, rising from 1.05 to 4.07 percent. During the period of low rates, roughly 16 percent of mortgages were taken with a fixed rate of up to ten years, the advisory firm reports.

De Hypotheker ran several scenarios and found that homeowners with partially interest-only mortgages are hit hardest. For example, a couple who in 2016 took out a 450,000-euro mortgage at 2.4 percent for ten years, including 200,000 euros interest-only, would now pay an extra 206 euros per month at today’s average rate of 4.05 percent.

Thanks to higher mortgage interest deductions, the increase is limited; without this tax advantage, their monthly payments would rise by 430 euros.

The impact of the higher interest rates on households seems generally manageable, summarizes De Hypotheker’s commercial director, Mark de Rijke.