The mortgage rate. A few years ago, rates of 1.2% to 1.6% barely raised an eyebrow. We thought it was the most normal thing in the world that money was almost free. These days the lowest mortgage rates are hovering around 4% again, and in recent months we have seen rates creep up once more. At the same time, they also dip slightly every now and then.
Contents
- Was a mortgage rate of 1.5% actually normal?
- From 1.5% to 4% doesn't sound so dramatic. Until you start doing the maths
- So how much do you get back through mortgage interest relief?
- Mortgage rates also determine how much you are allowed to borrow
- Did the low mortgage rate make our homes so expensive?
- And then, suddenly, rates went up
- So could a mortgage rate of 5% cause house prices to fall after all?
- Why are mortgage rates rising again in 2026?
- What on earth do oil, war and America have to do with it?
- Where are mortgage rates now?
- The 1.5% mortgage has another effect
- What do we expect mortgage rates to do?
- So should you wait to buy a home until rates fall?
- And what does this mean for house prices?
- What would we do now?
- Our expectations for mortgage rates in 2026 and 2027
What will mortgage rates do? Are you better off buying a home now, or waiting until rates come down again? And perhaps even more important: what does 1% more or less interest actually mean for what you pay each month, how much you can borrow and, ultimately, for house prices?
We get these questions more and more often, so we took a good deep dive into the numbers. Because mortgage rates are not only determined by what the European Central Bank does. Inflation, energy prices, wars, economic growth, the capital market and expectations about the future all play a part.
And to understand where mortgage rates might be heading, we first need to go back in time for a moment.
Was a mortgage rate of 1.5% actually normal?
No. Absolutely not. Many people who bought a home around 2020 and 2021 fixed their mortgage rate for ten, twenty or even thirty years at rates of roughly 1.2% to 1.6%. If you take that as your reference point, a mortgage rate of 4% naturally feels incredibly high. Those extremely low rates also made house prices rise enormously.
If we look further back, a very different picture emerges. In the early 1980s, mortgage rates above 10% were no exception and some rates were even around 13%. In the 1990s rates fell gradually, but even then 6% to 8% was perfectly normal. Around the turn of the century we were closer to 5% or 6%, and after that began a long period in which rates kept falling.
The absolute low point came around 2020 and 2021. Borrowing money was historically cheap then, and for some mortgage types and risk classes you really could get a rate of around 1.2% to 1.6%. We just got used to that very quickly.
That matters now that we are discussing whether mortgage rates are ‘high’. A rate of around 4% is high compared with 2021, but historically it is not exceptional at all. It was precisely those rates of around 1% to 2% that were exceptional.
From 1.5% to 4% doesn't sound so dramatic. Until you start doing the maths
A few percentage points of difference in interest may sound small. On a mortgage of a few hundred thousand euros, it absolutely isn't.
Let's take an annuity mortgage of €500,000 with a term of thirty years. At a mortgage rate of 1.2%, the gross monthly payment is about €1,655. At 1.5% it is about €1,726 and at 2% about €1,848. If the rate goes to 3%, the gross monthly payment becomes about €2,108, and at 4% about €2,387. At a mortgage rate of 5%, that same gross monthly payment rises to about €2,684.
That means someone borrowing €500,000 at 4% pays roughly €660 more per month, gross, than someone who borrowed the same amount at 1.5%. That is almost €8,000 a year. An average home in Utrecht now costs €570,000. That means the monthly mortgage payment is already higher than a median monthly salary.
And yes, with a higher rate you will in principle also get more mortgage interest relief. That makes the difference smaller in net terms, but it certainly doesn't disappear.
So how much do you get back through mortgage interest relief?
With an annuity mortgage, the monthly payment consists of interest and repayment. Only the interest part is tax-deductible, and you also have to take the eigenwoningforfait (the notional rental value of your home that is added to your taxable income) into account. What's more, with an annuity mortgage the interest part decreases over the term, because you pay off a bit of your debt every month.
If we again take that €500,000 mortgage and, for the sake of the example, a WOZ value (the municipal property valuation) of €500,000, the eigenwoningforfait in 2026 is 0.35%, or €1,750 a year. For someone whose interest relief is applied at the maximum rate of 37.56%, the difference in the first year looks roughly like this.
At a 1.5% mortgage rate, the gross monthly payment is about €1,726. In the first year you pay roughly €7,400 in interest. After offsetting the eigenwoningforfait, about €5,650 in deductible home ownership costs remains. The tax benefit then comes to roughly €177 per month.
At 4%, the gross monthly payment is about €2,387 and you pay about €19,800 in interest in the first year. After offsetting the eigenwoningforfait, around €18,050 remains. At 37.56%, that gives roughly €565 per month in tax benefit.
In this simplified example, the net monthly payment therefore comes to around €1,550 at 1.5% and around €1,820 at 4%. In net terms, the difference is not €660 but about €270 per month in the first year.
That is considerably less than the gross difference, but there is an important caveat. The tax benefit decreases over the term because you pay less and less interest. On top of that, everyone's personal situation is different. Income, WOZ value, mortgage type and your tax position determine what you actually pay net. And there is something else at play that may be even more important for a buyer than the monthly payment.
Mortgage rates also determine how much you are allowed to borrow
When working out your maximum mortgage, a bank looks at what you can responsibly afford in housing costs based on your income. The mortgage rate plays an important role in this. The higher the rate, the bigger the share of your monthly housing budget that goes on interest, and the less room is left to finance a large mortgage.
That is why the rapid rise in interest rates from 2022 onwards could have such a big impact on the housing market. On the same income, people could suddenly finance less and also faced higher monthly payments on the same mortgage. Some homes fell in value by around €100,000 within a few months. And all of that because of the mortgage.
Exactly how much less you can borrow at 4% than at 2% cannot be answered with one general percentage. It depends on your combined income, the fixed-rate period, age, any student debt and other financial commitments, the energy label and that year's lending standards. Those standards also change every year.
The mechanism is important to understand, though. Suppose tens of thousands of Dutch households can all borrow more thanks to a lower mortgage rate. Collectively, those buyers suddenly have billions of euros extra available to buy homes. If not many more homes are added at the same time, which has been the problem in the Netherlands for years, part of that extra borrowing capacity is simply bid up against one another. As a result, house prices rise almost automatically.
And that brings us to what may be the most interesting link: the one between mortgage rates and house prices.
Did the low mortgage rate make our homes so expensive?
In part: absolutely. De Nederlandsche Bank (the Dutch central bank) has researched extensively what happens when households can finance more. Between June 2013 and June 2022, Dutch house prices almost doubled. Over the same period, the mortgage rate fell from about 3.7% to 1.7% and average nominal income rose by more than 30%.
A higher income means people can spend more on housing, and a lower interest rate means they can borrow more. DNB calls this financing capacity. Precisely because the Dutch housing supply barely moves when demand increases, greater financing capacity translates to a large extent into higher house prices.
That is actually very logical. Suppose ten people want to buy the same house and can all pay a maximum of €500,000. Then the interest rate falls and those same ten people can suddenly finance €550,000. Physically, the house hasn't grown a centimetre and no extra bedroom has appeared, but there is more money available to bid on it. With enough competition, the price eventually shifts as a result.
For years now, we have actually spent an average of 30% of our household income on housing costs. When childcare became more accessible and more and more women went out to work, you also saw a huge rise in house prices. Simply because more money became available.
So the low interest rate made homes more affordable in terms of financing, but at the same time contributed to higher house prices. That is the strange paradox of cheap money.
And then, suddenly, rates went up
From late 2021, and especially in 2022, the interest rate climate turned at lightning speed. Inflation rose sharply, energy became more expensive and the ECB raised its policy rates. In a relatively short time, new mortgage rates went from around 1.5% or 2% to about 4%.
That had a direct effect on buyers' financing capacity, but house prices don't respond to that overnight. DNB looked specifically at that delay. Their calculations show that a fall in financing capacity can eventually feed through almost one-for-one into lower house prices, but that this process can take several years.
In practice, we did indeed see a correction after the rise in interest rates. From the summer of 2022, Dutch house prices started to fall. Prices generally fall more slowly than they rise. Sellers hold on to the price they have in mind for a while. But then something happened that is at least as interesting: mortgage rates stayed much higher than in 2021, yet house prices started rising again. How is that possible?
Because interest is only one side of the sum. As soon as collectively agreed (CAO) wages rose too, there was more purchasing power again. Wages rose considerably, financing capacity recovered as a result, and meanwhile the shortage of homes persisted. Despite the higher rates, buyers could pay more again and competition picked up once more.
That is exactly why you can never say: mortgage rates are rising, so house prices will fall.
So could a mortgage rate of 5% cause house prices to fall after all?
It could. Prolonged price falls on the Dutch housing market are certainly not impossible. We saw them after the financial crisis, and the rapid rise in interest rates in 2022 was also followed by a period of falling prices.
But enough has to happen to genuinely hit financing capacity. If the mortgage rate rises from 4% to 5% while wages barely increase, households can finance less and monthly payments go up. That puts downward pressure on house prices. If wages rise sharply at the same time, lending standards are relaxed or the housing shortage grows further, those effects can partly cancel each other out. From 1 January 2027, the property value limit for the first-time buyer's exemption from transfer tax goes up to €615,000. That is another small advantage, which is why I expect a slight increase there.
That is why we find the warning that prolonged price falls could happen again interesting, but it is not a prediction that they will start tomorrow. Ultimately, the Dutch housing market is determined by the combination of affordability, financing capacity, confidence, demographics and, above all, supply and demand.
Why are mortgage rates rising again in 2026?
For that, we need to distinguish between the ECB rate and the rate on the capital market. That may be a bit dry, but it is important if you want to understand why your mortgage rate moves.
The ECB sets the policy rate. That rate has a lot of influence on short-term interest rates in the economy, but a mortgage you fix for ten or twenty years is influenced much more by what happens on the capital market. Banks and other mortgage lenders look at what it costs to raise money for a longer period and at what investors demand for long-term bonds.
That is why mortgage rates can already rise without the ECB raising its rate. Financial markets look ahead. If investors expect higher inflation, bigger government deficits or more economic uncertainty, long-term rates can go up.
Incidentally, in June 2026 the ECB did step in. The central bank raised its key interest rates by 0.25 percentage points, bringing the deposit rate to 2.25%. In doing so, the ECB explicitly pointed to the inflationary pressure caused by the war in the Middle East. In July, rates were then left unchanged.
The ECB currently expects average inflation of 3.0% in 2026, 2.3% in 2027 and 2.0% in 2028. That last figure is important, because around 2% is the ECB's inflation target. As long as inflation is clearly above that, there is limited room for substantial rate cuts.
In the Netherlands, too, we see inflation remaining stubborn. In June inflation was 2.9%, and in July it rose again to 3.2%, according to CBS (Statistics Netherlands). Motor fuels and energy in particular drove that increase.
What on earth do oil, war and America have to do with it?
More than you might think. When a conflict in the Middle East drives up oil and gas prices, energy becomes more expensive. Businesses face higher costs for production and transport, and part of that is eventually passed on to consumers. Inflation can rise again as a result.
On top of that, European countries will need a lot of money in the coming years for, among other things, defence, energy, infrastructure and making things more sustainable. When governments have to borrow more for this, more government bonds come onto the market. Attracting enough investors may require a higher interest rate on them. That can push up long-term capital market rates and ultimately affect our mortgage rates too.
The United States also plays a role. The American capital market is so large that movements in US government bond yields have an influence worldwide. Trade tensions, import tariffs, budget deficits and the relationship between the United States and China can change expectations about inflation and economic growth.
The mortgage rate of someone buying a terraced house in Utrecht may seem to have little to do with a conflict thousands of kilometres away. Yet through energy prices, inflation and financial markets, that connection can be surprisingly quick to appear. It's rubbish, admittedly. But it is what it is. That's why it's important that we follow all these developments to shape the best buying and selling strategy. Timing can be hugely important here.
Where are mortgage rates now?
On 1 September 2026, the lowest mortgage rates at Hypotheekrente.nl start at around 3.78%. Various lenders' lowest rates sit between roughly 3.8% and 4.2%, with the actual percentage of course depending on factors such as the fixed-rate period, NHG (the National Mortgage Guarantee) and the ratio between the mortgage and the value of the home.
That is higher than many homeowners have been used to in recent years. At the same time, a lot of mortgages are still being taken out. In the first half of 2026, almost 5% more mortgages were taken out, according to the figures reported by Vastgoedmarkt.
So buyers have not dropped out en masse because the rate is no longer 1.5%. To a large extent, we have got used to the new interest rate level. Even so, from around October 2025 through to March 2026 we saw a fall in average prices per m². After that they rose slightly. But prices are no longer rising as fast.
The 1.5% mortgage has another effect
Because there is another peculiar effect of those extremely low rates from 2020 and 2021. Many homeowners fixed that rate for twenty or thirty years and naturally have no desire whatsoever to give it up.
Suppose you borrowed €500,000 at 1.5%. With an annuity mortgage, your gross monthly payment is about €1,726. For the same mortgage at 4%, that would be about €2,387. You see that difference in your bank account every single month.
That can mean someone who would actually quite like to move stays put for a few more years. With some mortgages the old rate can be taken along to the next home, but only under the lender's conditions and for the existing part of the mortgage. For the amount you have to borrow on top, you will in principle pay the current rate.
Internationally, this is known as the lock-in effect. People are, as it were, financially stuck to their attractive old mortgage. That can reduce movement in the market and thereby indirectly limit the supply of homes as well.
Ironically, those extremely low rates of a few years ago can therefore still contribute to the tight housing market today. Whereas with low rates it was attractive to move and pay hardly any more, we now see the opposite. People are sometimes living in far too big a home, but because of the mortgage it doesn't pay to move.
What do we expect mortgage rates to do?
This is, of course, the question that probably brought you to this blog. And if anyone can tell you exactly where mortgage rates will be in a year's time, I'd mainly ask them where that crystal ball is for sale. I'd love to have one..
Because not even the ECB knows that. The central bank explicitly stresses that it does not commit in advance to a particular rate path and looks at inflation, economic figures and new risks at each meeting.
Based on the information we have now, a quick return to mortgage rates of 1% to 2% does not seem likely to us. Inflation is still too high for that, and there is too much uncertainty around energy, geopolitics and the capital market.
Our base scenario is therefore that mortgage rates will keep moving around the current level for the time being. That doesn't mean 3.8% will stay at exactly 3.8% over the coming year. A movement of a few tenths up or down is quite possible. Much the same as last year, really.
If energy prices fall, geopolitical calm returns and inflation moves towards 2% more quickly, the ECB will eventually have room to cut its rate. For now, that looks like it won't happen until 2028. If capital market rates fall at the same time, mortgage rates could come down somewhat again.
But if inflation rises again, energy prices stay high or long-term rates rise further, mortgage rates could also move towards 4.5% or 5% again. That is not what we are predicting, but after everything that has happened since 2020, I wouldn't rule it out either.
For 2027, according to the ECB's current forecast, the inflation picture looks somewhat more favourable. The ECB expects average inflation of 2.3% in 2027 and 2.0% in 2028. If that does indeed happen, there will be more room for lower rates. But a lower ECB rate still doesn't automatically mean that your ten-year fixed mortgage rate will fall at the same pace.
So should you wait to buy a home until rates fall?
That sounds logical. Suppose you now pay about 4% and next year only 3%. On a €500,000 mortgage, the gross annuity monthly payment then falls from about €2,387 to €2,108. That saves almost €280 a month. Nice, right?
Definitely. But you are probably not the only one who benefits. Other buyers also get lower monthly payments and may be able to borrow more. If there are still too few homes for sale, part of that extra financial room eventually ends up in higher bids again.
That is exactly what we saw in the period after 2013. Lower interest rates and higher incomes increased financing capacity enormously, and because the housing supply did not grow enough to keep up, house prices rose sharply.
So waiting for a lower rate could mean you can borrow more cheaply later, but the same house has become more expensive. Last year prices rose by only 2%. In the past, that was sometimes the increase per month.
Conversely, we would never advise you to hurry and buy a home now because rates might go to 5%. You buy a home because it suits your life and your financial situation. Interest is important in that, but it is not the only number that counts. We need to stop seeing our safe haven as a speculative product.
And what does this mean for house prices?
When it comes to house prices, we mainly see the mortgage rate as a kind of brake or accelerator on financing capacity. If rates fall, buyers can pay more on the same income. If rates rise, the opposite happens.
But the speed of the car isn't determined by that pedal alone. Income, the housing shortage, population growth, new construction, confidence and regulation are all behind the wheel. The engine, the power, the fuel and the road all matter for the speed 😉
That explains why Dutch house prices almost doubled from 2013 while interest rates kept falling, why the market corrected temporarily after the sharp rise in rates in 2022, and why house prices were then able to rise again while mortgage rates stayed around 4%.
In Utrecht, there is the added factor that demand for homes is structurally high and supply limited. As a result, extra financing capacity can find its way into prices relatively quickly. At the same time, we can see that affordability really is an issue. The large new-build homes are proving hard to sell. Simply because people have to carry double housing costs for a very long time, which is almost impossible. On top of that, all those big, expensive homes barely have a garden. We did see that the huge extra supply from landlords selling off their rental homes (uitponden) caused prices to fall slightly and stabilise reasonably well. The market came into slightly better balance. At the same time, we saw that homes with large gardens, homes that were sleek, finished and full of character, sold incredibly fast.
If mortgage rates slowly fall from their current level and incomes keep rising, while the housing shortage barely shrinks, we therefore don't expect a lower rate to automatically make homes more affordable. Part of the benefit may simply disappear into higher house prices again. Unfortunately, that happens almost every time. It also sometimes seems as if we don't want things to become more affordable, because current homeowners don't always benefit from that.
Only when financing capacity comes under real, sustained pressure, for example through a combination of higher rates, lower income growth and economic uncertainty, does the chance of a longer period of falling prices increase seriously.
What would we do now?
For someone who wants to buy a home now, we would therefore try much less to predict the perfect interest rate moment and look much more at the overall sum. What does the house cost? What are your gross and net monthly payments? How much financial room do you have left after paying the mortgage? Can you still carry the costs if other expenses rise? Be sure to think about possible childcare too, because that really takes a very big bite out of your budget. How long do you expect to live there? And what happens when your fixed-rate period ends and you have to refinance?
A mortgage rate of 4% on a house you buy at a good price can ultimately be a much better decision than a 2% mortgage on a house for which you paid €75,000 too much.
And conversely, waiting for a rate cut of half a percent may ultimately achieve little if house prices rise by 5% over the same period. That is why we would never look at interest rates separately from the house price.
Our expectations for mortgage rates in 2026 and 2027
At the moment, we don't expect to return in the short term to the mortgage rates of 1.2% to 2.5% that we saw a few years ago. The circumstances back then were simply too exceptional. Current inflation, uncertainty around energy and geopolitics and the development of capital market rates make a quick return to that level unlikely.
For the coming months, a mortgage rate that moves around the current level therefore seems more plausible to us, with swings up and down remaining possible. By mid-2027 there may be more room for a fall, if inflation does indeed move further towards 2%.
But perhaps the most important conclusion is that a 4% mortgage rate is not as exceptional as it feels. Above all, we were spoiled by a period in which money was historically cheap.
Those extremely low rates meant people could borrow much more, and so they also contributed to the enormous rise in house prices. Now that rates are higher, we see the opposite effect on financing capacity, but that is partly offset by higher incomes and the large housing shortage.
So will mortgage rates fall? Maybe. Will they go up a little more first? That's possible too. But if you are buying a home, in our view you shouldn't try to predict exactly when rates will hit their lowest point. Hardly anyone manages that on the stock market, let alone on the mortgage market.
Look at what you can afford today, what you have left over each month and whether the price you are paying for the house makes sense. In the end, you have much more influence over that than over what Christine Lagarde decides next month. View our listings here, and would you like advice on buying or selling? We are happy to help.
