Why Raising Mortgage Interest Rates Shouldn’t Scare You
For the first time since the coronavirus epidemic, we are facing a significant increase in mortgage interest rates. Mister Mortgage’s Sezer explains why rising interest rates shouldn’t deter you from entering the housing market and how it could benefit you.
Low interest rates have benefited first-time home buyers and homeowners looking to refinance their high-interest mortgages for a few years.
In recent years, housing prices have increased, so the general feeling was that these prices were considered abnormal. The current interest rate situation may even be beneficial to you as a first-time home buyer, as it may initially scare off some of your competitors. Current owners are also getting nervous and selling their homes ahead of schedule. As a true Fundaholic you have probably already noticed that more properties are available.
So what’s next for you?
More competition from less savvy buyers
As interest rates rise, potential buyers may leave the market to wait for better terms, which means savvy buyers like you have fewer competitors!
Interest rates today are still historically low
Buying a home when mortgage interest rates are rising is nothing to worry about, and the current mortgage rate is still relatively low from a historical perspective.
For example, ten years ago, the average interest rate for first-time buyers was 4.53%, while in 2021, the average rate was 2.34%.
I bought my first apartment in 2013. My mortgage had an annual rate of 3.65% per annum, which was even a mortgage guaranteed by NHG. The current best mortgage rate with NHG is 2.84%. The Dutch housing market is always a safe place.
Higher interest rates signal economic recovery
When the economy is doing well, interest rates tend to rise. Increases in mortgage interest rates indicate that buyer confidence is back and that rising incomes and a tight labor market will help drive inflation over time.
Higher mortgage rates also indicate that investors feel more comfortable taking money out of the safer haven of bonds and reinvesting it in riskier investments like stocks.
Different variables can affect your mortgage amount, not just the interest rate. Focusing only on your mortgage rate diverts your attention from the actual cost of the loan, which can be a costly mistake. The lowest interest rate does not always mean the best loan offer. You should ask your mortgage adviser if it is possible to apply your current low interest rates in your new home or prepayment options.
The situation in the Netherlands
In the first quarter of 2022, the number of mortgage loan applications reached a new record. The refinancing of an existing mortgage led to an increase in applications in the first quarter of 2022.
Despite rising mortgage rates, buying a home is still a good investment compared to renting your home. The housing market is emerging from a period of historically low interest rates and, despite the growth, it remains historically low.
Mister Mortgage offers advice and financial services for people wishing to buy property in the Netherlands. If you have any questions regarding mortgage interest rates and how they might affect you, or any other questions regarding buying property in the Netherlands, please do not hesitate to contact their experienced and professional team.