Thirteen lenders have announced that they will raise mortgage interest rates, reports De Hypotheekshop. According to the organization of mortgage advisers, the increase is partly due to a phenomenon that repeats itself every year. For example, mortgage lenders traditionally raise interest rates as the summer holidays approach.
This way, according to De Hypotheekshop, they can still handle the workload with the reduced occupancy over the holiday period. However, mortgage rates are often lowered midway through the holidays to be ready for the start of the postseason.
Another reason for the increase is that interest rates on the capital market, which serve as the basis for medium- and long-term mortgage rates, have risen in recent weeks. That’s because the European Central Bank (ECB) and Federal Reserve will almost certainly raise their interest rates later this month as inflation remains stubbornly high.
Sharp increases in interest rates
For about a year now, central banks have been pushing interest rates hard to keep the high inflation rate under control. For example, the ECB has already raised the deposit rate by 4 percentage points. This reference rate affects the short-term mortgage interest rate or the fixed monthly variable mortgage interest rate for up to two years.
According to De Hypotheekshop, this has created a special situation where the short-term mortgage interest rate is higher than the (medium) long-term mortgage interest rate. Borrowing money with a shorter fixed interest period is therefore more expensive than borrowing money with a longer fixed interest period. It is usually exactly the opposite. This is partly because inflation is expected to decrease in the future and central banks are also lowering interest rates again.
While there has been a so-called inverted interest rate curve for mortgage interest in the past, according to De Hypotheek it has never been so extreme since the measurements began in 2004. The average monthly floating interest rate on mortgages is currently more than more than 0.5 percentage point above the interest rate for a mortgage with a ten-year fixed interest period. This is mainly due to the expectation that the ECB has not finished raising interest rates yet.
Source: BNR
Andrew Dwight is an author and economy journalist who writes for 24 News Globe. He has a deep understanding of financial markets and a passion for analyzing economic trends and news. With a talent for breaking down complex economic concepts into easily understandable terms, Andrew has become a respected voice in the field of economics journalism.
