How does the interest rate develop in August? Read our mortgage interest forecast for this month. In it more about the falling mortgage interest rate as a result of the Brexit.
Lenders adjust mortgage rates
The uncertainty after the Brexit vote has caused a further fall in market interest rates. Investors opt for ‘safe’ investments, including in government bonds. The interest on the capital market (for example, 10-year Dutch government interest) has fallen to a historically low point.
The capital market interest rate is an important indicator of the (in particular the long) mortgage interest rate. As expected, most lenders have adjusted their rates downwards over the past month. Compare the current mortgage interest.
What will the central bank do?
Since the vote for Brexit, the European Central Bank (ECB) has also been considered. Will the central bank take additional measures to compensate for the uncertainty in the market? The answer so far is ‘no’. On July 21, 2016, the ECB decided to keep the policy rate unchanged and not to expand the current buy-back program. They see current policy as ‘effective enough’.
Only when the prospects deteriorate does the central bank take action. This can be soon. The Brexit is now not only affecting British banks, but also on mainland Europe, confidence is falling and uncertainty is even shaking banks. According to analysts, the ECB is already introducing additional measures in September. Then the policy council meets again to meet.
Interest rate mortgage expected in August
Until then, we expect the mortgage interest rate to remain at the current low level. However, a slight fall in long-term interest rates cannot be excluded. A number of lenders still have to adjust the rates to the recent fall in market interest rates. The financial market can also already anticipate additional stimulus measures from the ECB.
Sharpest interest rate drop over
For the long term, the question “can interest rates fall much further” is more relevant than “when will interest rates rise”.
It was recently announced that the ECB may be in trouble with the buy-back program because of the government loans that qualify for this run out. This is a new dent in investor confidence in the central bank.
On the one hand, the ECB’s options for further reducing interest rates are becoming scarce. On the other hand, investor confidence in economic growth (a condition for an interest rate rise) is low. With this, the sharpest fall in interest rates seems to be over and we are approaching the bottom of the low mortgage interest rate.
We will further discuss the long-term interest rate development in our mortgage interest rate forecast for 2016.