Mortgage interest rates expected to remain high during the summer holidays

Thirteen mortgage lenders have announced that they will increase their interest rates for mortgages, De Hypotheekshop said on Monday. According to the organization for mortgage advisers, the increase is partly due to an annually recurring phenomenon where mortgage lenders traditionally raise their interest rates as the summer holidays approach.

In this way, they can still handle the amount of work with the reduced staffing levels during the holiday period, according to De Hypotheekshop. However, mortgage rates are often lowered halfway through the holidays to be ready for the end of the holiday season.

Another reason for the increase is that interest rates on the capital market, which serve as the basis for medium- to long-term mortgage rates, have risen in recent weeks. That is because the European Central Bank (ECB) and the Federal Reserve are widely expected to raise their interest rates later this month as inflation remains stubbornly high.

For about a year now, central banks have been pumping up interest rates sharply to bring the high inflation rate under control. For example, the ECB has already raised the deposit rate by 4 percentage points. This policy rate affects the short-term mortgage interest rate, or the variable mortgage interest rate per month up to two years fixed.

This has created a special situation in which the short-term mortgage interest rate is higher than the medium- and long-term mortgage interest rates. Borrowing money with a shorter fixed-interest period is therefore more expensive than borrowing with a longer fixed-interest period. Normally it is exactly the opposite. This is partly because inflation is expected to fall in the future and central banks will also lower their interest rates again.

It is often referred to as an "inverted yield curve," and although it has occurred before for mortgage interest rates, it has never been so extreme since the measurements began in 2004, according to De Hypotheek. The average monthly variable mortgage interest rate is currently more than 0.5 percentage point higher than the interest rate for a mortgage with a fixed interest period of ten years.

This is mainly due to the expectation that the ECB will continue to raise interest rates for the time being.