Up and down

Anyone who follows the housing market gets a lot of exposure to the words “up” and “down. And that in a combination that has been predictable for years with other words: prices kept going up and mortgage rates kept going down. The latter now seems to be coming to an end, as almost all lenders raised their interest rates last week. Some even did so twice in one week. According to De Hypotheekshop, we had to deal with the fastest increase in mortgage rates since the 2008 credit crisis. Among other things, the rapidly rising inflation leads to rising interest rates in the capital markets. And that is where mortgage lenders have to borrow the money, which they in turn lend to homebuyers.

Interest rates were already rising slightly since early January, and that has been causing greater numbers of mortgage applications since then. In recent years, according to Mortgage Data Network, there were about 10,000 a week. This year, there are now 13,000 to 14,000 per week and with interest rates even going up last week with some bigger jumps of 0.2 to 0.5, it is to be expected that there will be a somewhat bigger run on mortgages. Because many people want to take advantage of the still low rates and transfer their current mortgage or take out a mortgage for a renovation, for example.

Compared to say ten years ago, the mortgage rate (for example 1.3% for ten year fixed rate with NHG) may not be historically low, but still very low. Back then, 4 to 6 percent for ten years did not faze us. Some market watchers expect the level to move in the direction of 3 to 4 percent. TU Delft recently concluded in a study that at an interest rate of around 3 percent, house prices will still rise slightly. The researchers did not see an abrupt and substantial decline looming.

This brings us to the word “down” that we have known in recent years as belonging mainly to the supply of owner-occupied housing. And as long as a sharp increase in that supply is not expected, we will not see a sharp drop in prices either, is my expectation. However, the extent and pace of the price increase is slowing down somewhat. This is quite different locally, by the way. In December last year, house prices still rose by an average of 0.7%, but in 34 municipalities (not in our region) there was a slight decline. At least that is what research by Ortec Finance shows. I think the words “up” and “down” are going to keep us busy in the coming period