The mortgage rate has been a much-discussed topic in recent months. All I hear on the news is that mortgage rates are going to fall. What's the outlook for mortgage rates? Are they going to fall? Every week we share the figures for the Utrecht housing market, including mortgage rates. However, we see that they've been fairly stable for months. Yet everyone is talking about mortgage rates falling.
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In 2022 interest rates rose sharply. But now we're seeing a really very slight fall. The fall is almost nil. But what if that fall does continue strongly? That raises the question: is it wise to wait before buying a house, in the hope of further rate cuts? Although this may seem tempting, waiting isn't necessarily the best strategy. This week we saw that the Rabobank Basis 100% 10-year fixed mortgage rate fell by 0.08%. With a joint salary of €84,000, that makes a difference in the amount you can borrow of approx. €3,650. With a joint salary of approx. €150,000, it's approx. €6,000. So even a tiny fall like this already makes a difference to your borrowing capacity. That extra €3,650 costs you only €8 a month at a lower rate.
Update: This week, the week of 26 August, the Rabobank Basis 100% 10-year fixed rate fell to 4.26%. A drop of 0.12%. So it can actually fall quite sharply within a few months. So make sure you choose a daily rate (dagrente) and benefit from this fall.
Trends and expectations
Recently, mortgage rates have started to fall slightly. This is partly due to inflation cooling down. The European Central Bank (ECB) raised interest rates earlier to fight inflation, but now that inflation seems to be under control, the ECB is expected to lower rates again by the end of 2024. This could contribute further to lower mortgage rates, especially for variable rates, which depend heavily on Euribor rates.
Buyers who received the jubelton (the one-off tax-free gift towards buying a home) at the end of 2022 can use this gift tax-free for a house until the end of December. We expect some parties will still want to use this gift before the end of the year. That will mean a few extra transactions taking place just before the end of the year.
The third Tuesday of September is Prinsjesdag (Budget Day). The limit for the first-time buyers' exemption from transfer tax will probably go up then too. At the moment the limit is €510,000. This limit will probably rise to €525,000, as can be read in the official publications. Where many homes are currently selling at just around €510,000, this will shift to €525,000. Perhaps an adjustment will still be made, in which case it will be announced on Prinsjesdag. Nothing has been set out in the plans yet, so the limit is expected to be €525,000.
Daily rate vs. quoted rate
If interest rates are going to fall, shouldn't you wait before buying a house? Then your monthly costs could be lower. When choosing a mortgage, it's important to understand how the interest rate can change. Mortgage lenders offer two kinds of rates: the daily rate (dagrente) and the quoted rate (offerterente). With a daily rate, you benefit from any rate cuts up until the moment the mortgage deed is executed at the notary. This means that if rates keep falling, your monthly costs fall too. This can be very favourable. If rates fall, your monthly costs fall too. Get good advice on this from your mortgage adviser. The quoted rate, on the other hand, offers certainty, but you don't benefit from cuts that happen after it's been locked in. You sign for the rate and that rate then stays the same.
Wait or buy now?
Although it seems logical to wait for further falls, it isn't without risk. The housing market is constantly moving, and house prices remain high in popular regions such as Utrecht. By choosing a mortgage with a daily rate now, you can benefit from any future rate cuts without running the risk of missing out on a home. What's more, a further rise in house prices could cancel out any advantages of a lower rate.
Housing market figures
The housing market is challenging. Still, we always see that the summer holidays are a bit quieter. The number of house hunters drops. Supply drops. And you often see slightly less good transactions. Compared with July last year, the average transaction price has risen by 21.5% and the transaction price per square metre has increased by 20.1%. Enormous rises. Especially when you know the average transaction price is now €538,000. Last year the average transaction price was still €443,000.
A notable development is the fall in the average price per square metre in July 2024 to €6,395, compared with €6,542 in June. This could be a sign of a slight cooling of the market. But usually this is a seasonal dip. In addition, the overbidding percentage fell slightly from 14.3% in June to 13.9% in July. Although this is a modest fall, it suggests that competition among buyers has eased slightly. We expect a huge amount of supply to come onto the market in September, the number of house hunters to rise again and prices to climb rapidly.
Despite this slight cooling, the fundamentals of the housing market remain tight. The number of available homes has fallen by 26.5%, while the number of transactions has increased by 7%. This means supply is now really drying up. A market that's boiling dry means prices will rise further. I had the feeling that viewers were waiting for the fall in mortgage rates that keeps being announced.
The scarcity indicator (KI), which shows how much choice buyers have, has improved slightly from 1.1 to 1.2. This means there are now slightly more homes available per buyer, which may contribute to the slight fall in overbidding. Still, we see that the KI is already falling again.
Conclusion
Despite expectations of a further fall in mortgage rates, there's no guarantee that this fall will actually continue. Waiting can be risky, especially if house prices keep rising. By buying a house now and choosing a flexible type of rate such as the daily rate, you benefit from any rate cuts without having to postpone your purchase. So don't wait too long, because the perfect timing may well pass you by.
The expectation is that prices will keep rising and mortgage rates will fall. So it's smart to buy a house as soon as possible. A later completion isn't so bad then if you choose a daily rate. That way you benefit from falling rates. There's lots of lovely property coming onto the market. See you there?
