Iran war causing higher mortgage interest; First-time buyers hit hardest: ING

The Iran war has pushed up mortgage rates in the Netherlands, with the effects being felt most strongly by first-time buyers and people looking to purchase homes in large cities or newly built developments, according to ING Research.

The bank says mortgage providers have increased their rates since the outbreak of the war at the end of February, driven by rising interest rates on financial markets. The key benchmark for mortgage rates on the capital market is currently roughly 0.35 percent higher than before the conflict started.

ING explains that a surge in energy prices in recent weeks has led investors to expect rising inflation and tighter monetary policy. Markets are now pricing in two interest rate increases by the European Central Bank this year, a development that is also driving up long-term rates that influence mortgage pricing.

ING says rising mortgage rates are hitting first-time buyers the hardest, reducing their borrowing capacity by roughly 3 percent. However, the bank considers the overall effect manageable since the rate increases are relatively small. Those already on the housing ladder can usually transfer their older, lower interest rates when purchasing a new home.

Rising mortgage rates are particularly noticeable in large cities and the new-build segment, where many first-time buyers are concentrated, and housing supply is expanding. New construction projects tend to be more vulnerable to interest rate shifts, as the time between buying a property and its completion is typically longer.

ING states that future movements in interest rates will largely depend on how the war develops and whether energy flows recover. The Strait of Hormuz, a key route for global oil shipments, has been mostly shut since the outbreak of the conflict, and prolonged disruption could push rates even higher.