Mortgage summer update: News that could affect your home-buying plans

The summer has almost ended. We hope you had time to relax in your hammock, sip on your Piña Colada and ponder your goals for the rest of the year. If one of these goals is to buy a new home in the Netherlands, then this article by Klår Finance can guide you on what your next steps should be.

It is an exciting journey, buying a house, and along this journey you might hear a lot about the Dutch housing market, and you might ask yourself, is this a good time to buy? Well, lucky for you finance is our day job, so let us share our thoughts.

Mortgage market

Here is where we stand on the mortgage market:

1. Interest rates returned to the same level as April 2022 – what is next

With inflation slightly dropping, interest rates follow the same trend. From a mortgage perspective, this should be like music to your ears. Better interest rates lead to a higher borrowing capacity and lower monthly costs. There is a rumour that the interest might drop by an extra 0,5 percent in the coming future. This could be argued if we consider the economic instability in current world events.

2. An increase in mortgage applications since 2023 (according to HDN)

The increase in the number of applications in 2023 was mainly because of more first-time buyers and an uptick of second-time buyers deciding to take the plunge. It’s good to keep in mind that this increase affects the workflow for mortgage providers. Many are currently dealing with a strong delay in mortgage assessments (from three working days to sometimes more than 10 working days).

3. Better benefits for first-time buyers and happy singles

It turned out to be a good year for first-time buyers - according to HDN, approximately 12 percent of the total mortgage applications were done by first-time buyers. This was helped by the fact that many first-time buyers don’t have to pay 2 percent transfer tax and singles can apply for an extra borrowing capacity.

4. Increase of mortgages for sustainable homes

The energy label of a home affects the borrowing capacity for consumers. When purchasing a home, the better the energy label, the more you can borrow. There are also options for you if you already own a home with a less attractive energy label, in these cases homeowners can apply for a sustainability depot.

Alongside having a stronger borrowing capacity, you can also apply for a discount on the interest rate with highly rated homes. These new sustainability policies help, and we see more and more people are interested in sustainable homes or want to update the energy label of their current homes.

Housing market

Mortgages are strongly tied to the housing market. While our expertise is on financial guidance, we tend to see the broader picture and we would love to share our thoughts on the housing market as well. Important factors that drive house prices up are the “demand versus supply” of homes and the costs for borrowing money (the level of the mortgage interest rate).

1. Demand versus supply

You might already have read it in the newspapers: the construction of new homes is not keeping up with the increase in demand. Even with the higher interest compared to three years ago, the prices of property have gone up to historic levels (the average purchase price is currently approximately 486.150 euros). According to the market updates from financial institutions they expect prices will go up by 7,5 percent this year, and 5 percent in 2025.

2. Possible impact of interest rates on price levels

In our opinion there are three scenarios:

• Interest rates will stay stable - House prices will continue to increase because of excess demand versus limited supply.
• Interest rates will increase - Based on the last few years, the market will slightly slow down. However, people will have to deal with higher monthly costs for their mortgage.
• Interest rates will decrease - Positive news from a mortgage perspective, your monthly costs will go down. However, the downside (what we expect) is that the lower costs for a mortgage will accelerate the increase of property prices.

Long story short, as long as there is more demand than supply of homes, we expect prices will increase, therefore we expect the positive benefits of lower interest rates will be nullified by higher housing prices.  

Sustainability

The popularity of sustainable houses is on the rise. Based on regulation, and financial advantages, we expect this trend to continue. Investing in your home by making it more sustainable is not such a bad idea after all.

Are you curious about what your options are? And eager to investigate? Please feel free to reach out to Klår Finance. They’d love to brainstorm with you.