Dutch mortgage interest rate expectations for 2025

Mortgage interest rates have remained relatively stable between 4% and 5% from early 2023 through mid-2024. As we enter the final quarter of 2024 and rates begin to decline, it’s a good time to assess what the coming months and 2025 might bring. While predicting future rates can be challenging, we generally advise fixing your mortgage rate for a shorter term when rates are high or falling. On the other hand, if rates are low or expected to rise, opting for a longer fixed term is often wiser.

Unusual Interest Rate Patterns in 2024

In 2024, shorter fixed-term interest rates, like variable rates and 1- or 3-year fixed terms, were often higher than medium-term rates such as 5- or 10-year fixed terms. This “inverted” rate structure is uncommon since longer-term rates usually carry a premium due to the added security they provide. Looking ahead to 2025, what can we expect in terms of mortgage interest rates?

Inflation Trends in 2024 and 2025

Mortgage interest rates are closely linked to inflation. In 2024, inflation has gradually normalized following the significant spikes of the past two years. However, wage increases driven by union negotiations and high demand for workers have slowed the decline. Currently, inflation within the European Central Bank (ECB) zone stands at 1.8%, slightly below the ECB’s 2% target. The ECB’s goal now is to maintain inflation close to 2%, without letting it drop much further.

Capital Market and Interest Rates

As the economy cools, inflation continues to decrease. In August 2024, the ECB reduced its interest rate by 0.25% for the first time since 2020. The forecast for the remainder of 2024 includes another 0.25% reduction, with projections for 2025 suggesting three or four additional 0.25% cuts. This could result in a total rate reduction of around 1% by the end of next year.

Mortgage Interest Rate Outlook for 2025

Mortgage advisors closely monitor capital markets and 10-year government bonds, which serve as key indicators for longer-term mortgage rates. In 2024, these rates have hovered between 2.5% and 2.9%, indicating little movement in long-term mortgage rates. Meanwhile, the ECB Euribor rates, which affect shorter-term interest rates such as variable, 1-year, and 3-year rates, have dropped from 3.9% to 3.2%. As a result, major Dutch mortgage providers like ABN AMRO, ING, Rabobank, and Obvion have reduced their rates for shorter fixed terms. Looking ahead, we anticipate that shorter-term rates could fall by an additional 1% in 2025, while longer-term rates may decline by around 0.5%.

Is Now a Good Time to Buy a Property?

With mortgage interest rates falling and incomes rising, the Dutch housing market is seeing renewed pressure on prices. Rabobank projects a 10% increase in property values for 2025. In some cases, properties in popular locations or with unique features are attracting bids well above their asking prices, with overbidding amounts of €50,000 to €125,000 becoming common again.

However, not all properties are experiencing the same level of demand. Some homes remain on the market longer, allowing room for price negotiation. For first-time buyers, particularly those with lower to moderate incomes or single-income households, the current market can be challenging. In contrast, higher-income buyers, families with dual incomes, or those who already own property are finding conditions favourable for purchasing. All in all, if you’re an expat and planning on living in The Netherlands for a longer period of time, we think it makes more sense to buy a home.

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