Current mortgage rates

When looking for a good mortgage, it is not exactly easy to find an inexpensive solution. The above overview with percentages makes it a lot easier anyway. The question now, of course, is why are current mortgage rates rising? The main factor influencing this is the Central Banks.

These banks want to influence the global economy by adjusting the state of interest rates. Often, interest rates - and thus mortgage rates - rise when there is higher inflation. Interest rates can be used as a hedge against that inflation, which causes consumers' purchasing power to decrease. Higher interest rates mean, for example, that you can earn more money on your savings, but also that you pay more for the monthly repayment of your mortgage.

Mortgage interest rates have risen sharply since the beginning of 2022. This is mainly due to the fact that interest rates in the capital market are rising for long-term debt. Also, interest rates in the money market (for short-term debt) have only gone up. An important factor here is rising inflation.

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When does inflation take place?

Inflation has a major impact on rising mortgage rates and usually occurs after a strong economic growth period. This is because in this case, banks spend more money to stimulate the economy.

Lower interest rates make it more attractive to invest money in a home or to borrow money. The fact that money can be easily borrowed and that money is being printed are some of the factors that help create inflation.

The effects of rising mortgage rates

Rising mortgage rates logically bring some consequences for those who want to take out a mortgage or purchase a home:

1. A lower maximum mortgage

A first major consequence is that the maximum mortgage for people looking to purchase a home is lower. Indeed, as the interest rate on the amount borrowed rises, most consumers have less financial margin.

Mortgage interest rates are an important factor when it comes to maximum mortgage calculations. Nowadays, it is increasingly difficult even for people with higher incomes to get a mortgage, as interest rates are only going up.

In fact, this is related to the high inflation that is occurring. It also means that that rising inflation is incorporated into the standards for determining the maximum mortgage calculation.

2. Higher monthly costs

Of course, the monthly costs for a mortgage are also increasing due to higher interest rates. This means you pay more per month for the same amount borrowed from the bank compared to a few years ago.

3. An uncertain housing market

Based on these developments, house prices will steadily decline in the near future. On the other hand, of course, there are few houses for sale. So the demand for homes is still a lot higher than the supply.

Mortgage rates are rising, and that means there is a direct consequence for the housing market as well. Indeed, home seekers are now thinking twice before tying the knot and are more uncertain to take out a mortgage.

Rising mortgage rates make it more difficult to take out a mortgage on a new home. On the other hand, it is normal for those interest rates to rise and fall. Therefore, it does not necessarily mean that opportunities no longer exist for first-time buyers or people looking to move.

Regardless, rising mortgage rates bring challenges for home seekers. The extra costs involved in buying a home and paying off a mortgage are the biggest cause of this.

So while rising interest rates can indeed be positive (for example, if you are saving money in an account or lending money), it certainly pays not to underestimate its effect on your mortgage options.