Help, mortgage rates are rising. What can I do?

It won’t have escaped your notice: mortgage rates have risen sharply in recent months. These are increases of a few tenths to one percent, in a short period of time. There is a lot of talk about it and people get nervous; where does this stop? What is best for you to do: go along with this frenzy, or continue to wait quietly?

What actually caused the increase?

We briefly explain below why interest rates are rising now:

– The main reason for rising mortgage rates is that the European Central Bank has raised interest rates. Previously, they lent their money to the big mortgage lenders for “next to nothing. The mortgage lenders then lent it back to you, at a very low interest rate: about 1 to 1.5%.

– The ECB did this for a reason: to stimulate the economy. Because, if everyone starts borrowing more money, more will be spent. Buying a house, starting a business, buying a car, you name it. Because of all that spending and investment, the economy has had a tremendous boost in recent years.

– This has worked out well in recent years, but the flip side of “cheap money” is inflation; again, the economy should not do too well or our money will be worth nothing.

– So the ECB raised its interest rates, and logically the banks we borrow our money from followed suit. When they do not change their interest rates, it comes at the expense of their profits. Hence, mortgage rates are now rising. Also at play is the war in Ukraine. This makes for economically uncertain times. Banks and large corporations therefore wait to invest, which ultimately also causes higher interest rates.

You want to buy a house now, what is the best thing to do?

First of all: stay calm, don’t get mad. Interest rates affect your borrowing capacity so first of all, get well informed about what it means for you personally. If you have a mortgage advisor, they can easily review for you the impact of increased interest rates. You haven’t borrowed the money yet, so you don’t have to spend it. Based on a new check, you can figure out how much money you want to spend on your new home, namely what your monthly expenses might be. Your mortgage advisor will not only look at the interest rate but may also play with other variables: what kind of mortgage do you want to take out, how long do you want to lock in the interest rate. After all, this all affects your monthly amount as well.

In other words, look mainly at the amount you will pay later. In terms of interest rates, you always know only after the fact whether you made a good choice or not anyway. Do you think the monthly burden is too high? Then fix the interest rate for a shorter period of time. Or make a mix by fixing the interest rate a little longer, and a little shorter. Your mortgage advisor will be happy to help you with this.

Every advantage has its disadvantage

What you saw in the past may happen again now. When mortgage rates rise, it can also mean that savings rates will also go up. To slow down the (too) fast-growing economy, borrowing money is becoming more expensive. Therefore, to ensure that people do not spend their savings (or spend less), savings rates may start to rise.

In addition, house prices have skyrocketed in recent years. Higher interest rates also automatically mean (even if it sometimes takes a little longer) that, with less demand, prices will also fall.

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