Mortgage interest Rate Graph 2016Mortage rate Chart 2016
Prolonged fix-rate term for private mortgage lending more sought-after
More and more Netherlands budgets are opting for longer interest rate spans when taking out a new home loans with Netherlands bankers, possibly also because of the low interest rate. By March 2016, the vast majority or 52% of Netherlands homes decided to have a fixed-rate term between five and ten years when they took out a new mortgage or renegotiated their current one.
A further 20.5% favoured a fixed-interest term of more than ten years. Most of the other newly concluded mortgage loans had terms of up to one year (15%) or between one and five years (12.5%). In recent years, the preferential fixed-interest rate has risen (see chart 1). In the Netherlands, the proportion of homes that opt for a ten-year or longer reference rate was significantly higher in 2015 (16%) than in 2014 (6%).
Likewise, the number of new mortgage contracts with a fixed-interest term of five to ten years rose from 39% to 52%. Long-term interest rate preferences for new private construction financing have been higher among households in the euro area than among those in the Netherlands for some recent years (see Chart 1).
Nearly half (47%) of Eurozone householders decided in favour of a fixed-interest rate of ten or more years. A further 22% elected a five to ten-year fixed-interest term. Between one and five years a 10% rate was chosen, 21% prefer a fix interest rate of up to one year.
As of March 2016, Netherlands budgets had EUR 517.6 billion in mortgage credit from Netherlands commercial bankers. In the same period, new mortgage lending of almost EUR 10 billion was granted in the Netherlands at an interest rate of 2.69% on a daily rate scale. Mean interest rates on new private mortgage lending across the whole Eurozone were 2.22%, some 55 base points lower than in the Netherlands (2.77%).
As regards interest rate developments for the different reference interest rate horizons, the Netherlands and the Eurozone are gradually approaching each other in terms of new private mortgage loans with a longer reference interest rate horizon (see Chart 2). During February 2014, for more than ten -year reference interest rate episodes, the interest rate in the euro area was on 3 February 2014 on 1.4 points lower on average than in the Netherlands.
However, in February 2016 this gap fell to 0.8 percent. In the Netherlands and the euro area, preference for longer standing interest rate windows and interest rate developments for these longer standing interest rate windows are progressively approaching. As interest is lower, the preferential interest rate for new construction financing is longer.