Dutch mortgage interest rate expectations for 2024
After a steep increase of mortgage interest rates in The Netherlands in 2022, last year was somewhat more stable. During 2023 mortgage interest rates fluctuated between 4% and 5%. Due to more stable mortgage interest rates in combination with inflation falling back, we saw home-buyers returning to the market. Looking forward, what can we expect the coming year?
Inflation will return to lower values in 2023
Mortgage interest rates are correlated to inflation. You could not have missed last years grocery store receipt or your energy bill. Thankfully over the last few months we see inflation in The Netherlands and EU dropping back to more normal levels. The expectation now is that the European Central Bank (ECB) will closely keep watching inflation in the next few months in the hope it will return to around 2%.
Capital market interest rates
The ECB is trying to lower the inflation in the whole eurozone to around 2%. This is their foremost goal but seems to be put in motion at the moment. Sometimes it is difficult as different countries in the EU have different levels of inflation or other struggles. If the ECB is assured that inflation will reach the target levels they will slowly start decreasing interest rates again. Potentially we could see this happening in the second half of 2024.
What will mortgage interest rates in 2024 do?
Mortgage advisors always keep an eye on the capital markets and government bonds for 10 years fixed. This rate is a good indicator for mortgages with a longer interest fixed term. In the last 3 months we see a significant drop from 3,3% to 2,5% for 10 year government bonds. Over the past few weeks we have seen Dutch mortgage providers such as ABN AMRO, ING or Rabobank drop their mortgage interest rates several times. This is especially the case for medium and longer interest fixed terms such as 5, 10 or 20 years. Variable interest rates remain high at the moment. We expect in the remainder of the year rates to stabilize again and towards the summer they could start dropping.
Should you buy a property now?
With interest rates having stabilized and home buyers returning to the market, we see prices are starting to increase again. For some properties that either look beautiful or are in the right city or neighbourhood you need to dig deep. With that we mean overbidding amounts of 25.000,- to 75.000,- euro on top of the listing prices is happening again. However, it is not true for all properties yet as we see some still on the market for a longer period of time and a price can be negotiated with the seller. Overall conditions are favourable to buy a home in The Netherlands and we expect a price increase of 3% to 6% for 2024.
The limit for NHG mortgages also increased to 435.000,- euro and if you are under 35 the starter exemption on transfer tax now applies to home purchases up to 510.000,- euro. Both the lower NHG rate compared to a normal mortgage rate and the lower one-off transfer tax present interesting opportunities.
Also for home-owners that have recently bought a home but have higher interest rates it is not all bad. With rates heading lower at the moment, your home will likely become worth more and if you ever want to move to a next home in The Netherlands you can always cancel your mortgage without a penalty upon sale and apply for a new mortgage once again but then with hopefully lower rates.
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