Mortgage interest rate development 2019 | Does the interest increase? Thursday, January 03, 2019 By: Roel 6756 reads
How does mortgage interest develop in 2019? This is our prognosis based on developments in the market. Does the mortgage rate rise in 2019?
How does mortgage interest develop in 2019?
Mortgage interest rates are still historically low. This is partly due to interest rate policy of the European Central Bank (ECB). The development of the economy and ‘mood’ on the financial markets also affect interest rate developments. We discuss these factors and give our prognosis for the mortgage interest in 2019 .
Why is the mortgage interest rate low?
Due to the Euro crisis and the subsequent low economic growth, the ECB has taken far-reaching measures to stimulate the economy. The central bank has lowered the policy interest rates and bought up loans for billions of euros per month.
This ensures that there is a lot of ‘cheap money’ available to lend through mortgages, but also to borrow business loans and consumer money . Saving is unattractive because of a low savings rate . This should boost spending in the euro zone.
Incentive measures reduced
The economy in the Eurozone has now recovered in such a way that the European Central Bank has started to phase out the stimulus measures. From 2019 the buying program has stopped . This less accommodative monetary policy of the ECB makes room for an interest rate increase.
The buy-back program mainly affects capital market interest rates, which is another important indicator for long-term mortgage interest such as 20 years fixed interest .
Uncertainties in the market are depressing interest rates
The next step, raising the policy interest rates, is currently not on the agenda . The ECB indicates that it will maintain low interest rates until after the summer of 2019. The central bank sees the following risks:
- The economy is growing, but less quickly. China is experiencing a slowdown in growth, among other things.
- The outcome of the Brexit negotiations. Is there a hard Brexit or not?
- The emerging protectionism, such as the trade war between the US and China.
The above uncertainties also cause caution on the financial markets. Investors exchange their more risky investments for bonds from economically stable countries such as Germany and the Netherlands. The supply of money on the capital market therefore remains large. Investors expect low remuneration and as a result capital market interest rates remain low, as can be seen in the graph below.
Mortgage interest rate development 2019 (our expectation)
Only when the uncertainties in the market disappear into the background, there is more room for an interest rate rise. Until then, mortgage interest rates remain at the current low level. You still have a chance to still record the low mortgage interest .
At the beginning of 2019, however, we see the uncertainty increasing. Capital market interest rates are at the lowest level since 2 years. This offers room for lenders to lower their mortgage interest rates. Ee
Due to the increased competition on the mortgage market, the margins have become smaller. Moving with the market is necessary for those who want to offer the lowest mortgage rates. Lenders adjust their rates quickly in response to changing market conditions.