Today the Good Finance decided to stop the buy-back program. What consequences does this have for mortgage interest? Read our interest rate forecast.
Why is the mortgage rate low
The mortgage interest is historically low. This is partly due to the low interest rate policy that the current European Central Bank is pursuing. To stimulate the economy, the central bank keeps policy rates low. The Good Finance also buys billions of unattractive government loans every month.
By pumping ‘cheap money’ into the economy, borrowing (mortgage and consumer credit) and investing become attractive. Saving is actually discouraged by the low interest rate. This should boost spending in the Eurozone.
Good Finance decides on mortgage interest
The economy in the Eurozone is now picking up and the inflation target of almost 2% is also clear. It was therefore in line with expectations that the Good Finance will phase out the stimulus. The current purchase program ends in September.
The Good Finance has decided to further phase out the buy-back program after September. On December 31, the central bank will stop buying up government bonds.
Reducing the stimulus means that the pressure on mortgage interest will be reduced. The wide range of capital guarantees a low capital market interest rate. This is again an important indicator of the long-term mortgage interest, such as 20 years fixed.
The consequences for the mortgage interest
The expectation is therefore that the mortgage interest will rise slightly in the second half of 2018 and in 2019.
The question is how much we will notice as a consumer. Historically, mortgage rates are still low. In addition, there are various factors that ensure that mortgage interest rates will only rise to a limited extent.
- The Good Finance wants to keep pressure on mortgage rates under other policy instruments. The Eurozone still faces a number of challenges such as limited wage growth and expensive Euro against the Dollar.
- Due to turmoil in the financial markets (crisis in Italy, possible trade war), investors are fleeing ‘safe havens’. A larger supply of money on the capital market of countries such as the Netherlands and Germany ensures a lower capital market interest rate.
- Competition on the mortgage market has increased, among other things with the arrival of new providers such as Tulp and Vista. In the battle for the mortgage customer, lenders are forced to praise competitively and to offer generous conditions.
What does the savings interest do?
Anyone who now expects a higher savings rate must be disappointed. The buy-out program mainly depresses long-term loans. For the time being, the Good Finance does not reveal anything about raising the interest rate policy that affects savings rates. Read why the savings interest does not rise with the mortgage interest.