Interest rates in the Netherlands and expectations 2023-2024

What are interest rates?

Mortgage interest rates in the Netherlands can vary based on a number of factors, including the kind of mortgage and the creditworthiness of the borrower. The annuity mortgage and the linear mortgage are the two most frequent forms of mortgages in the Netherlands.

An annuity mortgage is a form of mortgage in which the borrower makes equal monthly payments on both the principle and interest. An annuity mortgage has a set interest rate for the full period of the loan, which is typically 10, 20 up to 30 years. An annuity mortgage often has a higher interest rate than a linear mortgage since the lender is taking on greater risk by financing for a longer period of time.

A linear mortgage is a form of mortgage in which the borrower pays just the interest in monthly installments for the first few years before beginning to pay back the principle as well as the interest. Because the lender is incurring less risk by financing for a shorter length of time, the interest rate on a linear mortgage is generally lower than the interest rate on an annuity mortgage.

The Dutch Central Bank (DNB) establishes the benchmark mortgage interest rate, which is the average interest rate at which Dutch banks lend to one another. This benchmark rate, known as the Euribor, is used to determine mortgage interest rates. The Euribor rate is determined by the interest rate at which a group of banks lend money to one another in the Euro interbank market. A mortgage's interest rate might also change based on the borrower's creditworthiness. Borrowers with a good credit score and a consistent income will often be offered a lower interest rate than borrowers with a poor credit score or a less consistent income. The loan-to-value ratio and the type of property being financed are two more factors that might affect mortgage interest rates.

The Netherlands offers a tax benefit scheme for mortgage borrowers, and mortgage interest is tax-deductible up to a specific amount. The tax break is known as the "Hypotheekrenteaftrek," and it allows homeowners to deduct mortgage interest from their taxable income. This tax break makes mortgage repayment more reasonable for homeowners while also helping to stabilize the housing market.

Finally, mortgage interest rates in the Netherlands might vary depending on the kind of mortgage, the period of the mortgage, the borrower's creditworthiness, the loan-to-value ratio, and the type of property being financed. The most prevalent forms of mortgages are annuity and linear mortgages, with interest rates typically determined depending on the Dutch Central Bank's Euribor rate. The tax credit "Hypotheekrenteaftrek" is also a significant feature in the Dutch mortgage market, as it makes mortgage repayment more reasonable for homeowners.

Interest rate expectations for 2023-2024

Since reaching a high of 10.6% in October last year, inflation has slowly begun to decline, falling to about 9.2% in December. This is based on information which is available online. Previously, rising food and energy costs were the primary drivers of inflation. Inflation is decreasing again as these prices hardly rise and are beginning to fall. However, the decline is contained to a small area since businesses are attempting to pass on the greater cost of raw materials to their consumers. Therefore, costs for everything but food and energy have been rising at a quicker rate. Excluding the volatile effects of changes in oil and food prices, "core" inflation is presently at a very respectable 5.2%. Therefore, the total drop in inflation is rather small.

The European Central Bank (ECB) does not believe current inflation to be at an acceptable level. The European Central Bank (ECB) is responsible for ensuring that inflation remains low and stable at 2% each year. That's much below the rate of inflation right now. The European Central Bank (ECB) must act due to the wide gap between desired and actual inflation. When the European Central Bank (ECB) tightens monetary policy, it limits the expansion of the money supply. As a result, inflation should decrease over time."

Inflation is falling, but it is falling more slowly than we would like, and it is still more than the European Central Bank considers acceptable. Businesses are looking to recover some of their increased expenses by raising the pricing of their wares and services to customers. This is also due to the Coronacrisis that we've had previously. The European Central Bank has decided to take action by reducing inflation down to their level of acceptance. Time will tell, but it will be interesting to watch what happens. The economy is like a rollercoaster; there will be ups and downs, but if you can hold on, it will be pretty exciting!

Overview interest rates in January 2023

Below an overview of the top 5 banks and lenders in the Netherlands with the interest rates that they are offering at the moment.

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