How does the mortgage interest rate develop in April? This is our mortgage interest expectation for this month. More about the development of the new ECB measures.
Mortgage interest rates fell further
Mortgage interest rates fell further in March. The lowest mortgage interest rate is currently 1.25%. This is not a coincidence. During the meeting of the European Central Bank on 10 March it was decided, among other things, to lower the refi rent from 0.05% to 0.00%. This is the first time in 1.5 years that the ECB has adjusted this policy rate.
The referent is the rate that banks pay to borrow money from the central bank. This policy interest rate partly determines the Euribor interest rate and this is again an important indicator of the short mortgage interest rate. Many lenders have therefore fixedly reduced their variable mortgage interest rate and the mortgage interest rate for 1 year.
Short mortgage interest expectation
During the press conference after the meeting, ECB President Draghi said he would not lower the referent further. Although this is possible, he expects this to be necessary. We therefore expect that the mortgage rates for the short-term fixed-rate periods in April will remain at the current low level.
Purchase program intensified
The ECB’s policy also plays an important role with regard to mortgage interest rates for rates from 1 year. Last month, the central bank decided to expand the buy-back program and extend it to 2017. The ECB buys more unattractive bonds from banks every month.
Expectation of long mortgage interest
The buy-back program has a negative impact on interest rates for government loans, including the 10-year Dutch government loan. This capital market interest rate is an important indicator of the long-term mortgage interest rate. We therefore expect rates for the long-term fixed-rate periods to fall further in April.
The European Central Bank keeps interest rates low to stimulate the economy. Banks can get cheap money to borrow. This must ensure that spending in the Eurozone increases. Banks pass on this low interest rate (in part) to the mortgage interest rate. Saving is made unattractive.
Margins possibly higher
The difference between the market interest rate for the bank and the mortgage interest rate for the customer is called the margin. There is a chance that banks will charge a higher margin in the future. The Committee that oversees the banks has decided that banks must maintain a higher capital buffer for the riskier (top) mortgages. This can, in time, lead to a higher mortgage interest rate. See also our mortgage interest rate forecast for 2016.