Trend break: ABN takes into account rising mortgage interest rates

That is the expectation of ABN Amro.

The bank previously assumed that, despite the fact that the mortgage interest rate is already historically low, interest rates would fall further. But that prediction dated from before the moment when the corona crisis erupted in full force in the Netherlands and in the rest of the Western world.

Interest up

“It is therefore plausible that the mortgage interest rate will rise slightly rather than fall, as we previously expected. This applies to both short-term and long-term fixed-rate loans,” the economic agency writes.

The reason for this is the financial uncertainty that has suddenly arisen. As a result of the crisis, corporate profits and share prices are falling sharply. In addition, bond yields are rising, as the likelihood of companies failing to meet their debt obligations increases in the long term.

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More difficult to get money

“Due to the expected credit losses, it has also become more difficult for banks to attract money for lending,” ABN adds. And while central banks are willing to provide cheap money to banks on a large scale and keep bond yields low through buying programs, borrowing money is likely to become more expensive.

The bank says that the crisis entails credit risks, which increases the likelihood that interest rates will rise rather than fall.

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Get used to

For homebuyers, that news takes some getting used to, because in recent years the line has only continued to go down, making borrowing money to buy a house increasingly cheaper.

Mortgage interest rates fell to an all-time low last month. Homebuyers can set interest rates at less than 1 percent for ten years.

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