Lower interest rates do not make home loans cheaper

09 augustus 2022


Despite the sharp fall in long-term interest rates, the banks are barely cutting home loan rates.

The Belgian long-term interest rate peaked at 2.5 percent in mid-June, but has since fallen sharply. Meanwhile, the 10-year interest rate has been trading at around 1.5 percent for a week. The main reason for the decline is concerns about a cooling economy and an imminent recession.

The fall in long-term interest rates has not yet translated into lower rates for home loans, according to a survey at Immotheker and Hypotheekwinkel.be. These credit brokers look for the cheapest home loans on the market for their customers. “We see very little movement in the rates,” said John Romain, the CEO of Immotheker Finotheker.

The banks want to safeguard their profit margins, although we have to say that they also waited a long time a few months ago to raise mortgage rates.

John Romain

CEO Immotheker Finotheker

According to the credit intermediary’s interest rate barometer, the average interest rate on a loan with a term of 20 years has remained at 2.7 to 2.8 percent in recent weeks. These are mortgages where borrowers borrow a maximum of 80 percent of the purchase price of a home. By way of comparison: in February the interest rate was still 1.5 percent. ‘Banks want to safeguard their profit margins, although we have to say that a few months ago they also waited a long time to raise interest rates,’ says Romain.

Longer lead time

According to Renaat Acke of Hypotheekwinkel.be, it is striking that banks react more slowly to a fall in interest rates than to an interest rate rise. Banks traditionally wait a while to see whether the interest rate evolution is sustainable. But it’s clear that they are chasing the facts more today than ever before,” he says. According to Acke, this has not only to do with the profit margin, but also with other elements. ‘Due to fears of a further rise in rates, many clients have accelerated their files in recent weeks, resulting in some delays in processing at the banks. In addition, there is plenty of holiday time, which means that the lead time is longer. As a result, there is less need for additional files.’

I advise clients to wait until September, if they can wait.

Renaat Acke

CEO Hypotheekwinkel.be

The credit intermediary does expect competition to flare up again in September. “I advise clients to wait until September, if they can wait. Each bank commits a certain volume of savings that it wants to convert into home loans. If it appears that the demand for credit is slowing, action is often taken to achieve that volume. Moreover, the profit margins on home loans have not been exceptionally low for several years. There is certainly room for lower rates. Even when the interest rate was around zero, the rates, and therefore the margins, were at 1 to 1.5 percent,’ says Acke.

According to the broker, interest in home loans may also increase in September for another reason. ‘From 1 January, buyers of homes with a poor energy score (E or F) are obliged to renovate their homes energy-efficiently to a D-score. The date of the deed of purchase is important. Anyone who is considering such a home and does not want to be subject to that renovation obligation must have the purchase deed executed before the end of the year. Because of the lead time for such a deed, a compromise must be concluded by September at the latest’, he says.

renovation loan

As with mortgage loans, the lower interest rates do not filter through to green loans and renovation loans. These loans, which are usually taken out for a term of up to ten years, can be used for the renovation of the home. The difference between the two has to do with the energy efficiency of the renovations. If more than half of the amount borrowed is for an energy-efficient renovation, the (cheaper) green loan is possible. The advantage of these types of credit is that they can be taken out without filing costs and that no underlying mortgage is required. As a result, the maximum amount to be borrowed is limited to 50,000 to 75,000 euros.

The rates for both types of credit have already risen sharply in recent weeks in the wake of rising interest rates. For the green loan, they are between 2 and 3 percent, depending on the bank and the term. For a renovation loan, this is between 3 and 4 percent. Not a single bank contacted by De Tijd has a drop in rates in the pipeline. No rate change is planned. However, the interest rate evolution is closely monitored, so that rate changes are always possible’, says Belfius.

The essence

  • The Belgian long-term interest rate has fallen from 2.5 percent to 1.5 percent since mid-June.
  • However, the lower interest rates do not filter through to the rates for home loans or renovation loans.
  • Credit brokers refer to the profit margins, but also to the holiday period.
  • If long-term interest rates remain the same, they believe that a drop in rates in September is possible.

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