First mortgage interest rate increases after 12 weeks of decline

Mortgage interest rates appear to be rising again after having fallen for 12 consecutive weeks. Mortgage advisory firm De Hypotheekshop, which tracks rates and identifies trends, said rates are rising because interest rates on the capital market have also risen in recent weeks. Mortgage providers typically turn to the capital market to borrow money.

According to De Hypotheekshop, the higher interest rates on the capital market are due to the expectation that the European Central Bank (ECB) will not lower interest rates during its meeting this week. The ECB will announce the decision on Thursday. ECB President Christine Lagarde said last week that interest rates are unlikely to fall until this summer.

The interest rates on fixed and variable mortgages are developing differently, and that is striking, according to De Hypotheekshop. About a year and a half ago, the interest rate on fixed mortgages with a term of ten years covered by the National Mortgage Guarantee (NHG) was higher than the average interest rate on variable mortgages, by a difference of 2.2 percentage points. This has now been reversed, according to De Hypotheekshop.

The interest rate on variable mortgages is now 1.4 percentage points higher than that of fixed mortgages where the interest rate is set for ten years. The NHG offers a safety net when house prices fall and ensures that some home buyers can obtain a lower interest rate.

On Monday morning, Statistics Netherlands (CBS) and the Kadaster land registry announced that homes on the tight real estate market were 1.6 percent more expensive last month compared to December 2022. It was the first time in almost a year that home prices have risen on an annual basis. De Hypotheekshop called the period of falling prices “remarkably short.” Sharp increases in mortgage interest rates caused home prices to fall slightly since mid-2022. With higher interest rates, people can borrow less money to buy a house.

The average price of a home was more than 422,000 euros last month, 0.2 percent higher than in November. The increase reported by Statistics Netherlands and Kadaster is because there are still far fewer homes on the market compared to the demand for housing. Wages have also risen, meaning buyers have more money to spend.