What are mortgage rates doing according to Obvion?

Our experts give their expectations for the period ahead. See at a glance the forecast for mortgage rates also on the Mortgage Interest Rate Forecast.

Short-term interest rates

Short-term mortgage rates follow the European Central Bank's policy rate. As inflation has now slowed considerably and economic growth is stagnating, the European Central Bank (ECB) is cutting the policy rate. At its last meeting on 17 October, the ECB cut the policy rate by 0.25 per cent. The next meeting on 12 December will see further interest rate cuts; the ECB is expected to cut the policy rate again by 0.25 per cent at this meeting.

The US central bank (Fed) cut the US policy rate by 0.25 per cent during its last meeting. Interest rates are expected to be cut again by 0.25 per cent at the next meeting on 18 December.

On balance, we expect a declining level of short-term mortgage rates in the coming period.

Long-term fixed-rate mortgage rates

We are currently seeing that central bank policies are having the desired effect and the economy is cooling. The higher policy interest rates compared to recent years are having a dampening effect on consumer demand. This cooling of the economy is also reflected in the inflation figures. Compared to last year, inflation rates have fallen sharply in both Europe and the United States. Eurozone inflation in November was 2.3 per cent and in the United States we saw inflation of 2.6 per cent. With this, inflation in Europe has almost reached the ECB's target level of around 2 per cent. This gives the ECB room to ease its policy further.

Besides the drop in inflation, we also see the cooling of the economy reflected in the number of bankruptcies. In the Netherlands, for instance, we see the number of bankruptcies showing an upward trend over the past 2 years. These figures should be put into perspective though, two years ago the number of bankruptcies was still at historically low levels. Despite this cooling down, the labour market is still very tight. This is also reflected in the sharp CAO increases. In the Netherlands, CAO wages rose by 6.9 per cent compared to the same quarter a year earlier. These salary increases pose a risk to the development of inflation; should inflation rates rise again in the future, this will have an upward effect on long-term mortgage rates.

Central banks are cutting policy rates, but do mortgage rates automatically fall as a result? That sounds logical, but not necessarily the case. Central bank interest rates mainly affect variable and short-term mortgage rates. Longer mortgage rates follow capital market rates, these rates are mainly influenced by long-term inflation expectations. In addition, central bank interest rate cuts are often already priced in by the financial markets. Should the economy cool down faster than expected in the coming period, there is a possibility that long-term mortgage rates could fall further. Currently, financial markets expect the economy to cool further and inflation to maintain sight around the desired 2 per cent.

On balance, we expect a declining level of long-term mortgage rates in the coming period.

More interest rate forecasts

Also read expectations for interest rates from our other experts: Philip Bokeloh and Sander Burgers.

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