The summer holiday has almost ended. We hope you had time to relax in your hammock, sip on your Piña Colada, and ponder your goals for the rest of the year. If one of these goals is an inspiration to buy your new home, then this article can guide you on what your next steps should be. It is an exciting journey, and along this journey you might hear a lot about the housing market and you might ask yourself, is this a good time to buy? Well, lucky for you finance is our day job, so let us share our thoughts!
In this article, we share our insights about the mortgage market and its potential impact on the housing market.
Mortgage Market
Previously, we pointed out some government mortgage guidelines for 2024 (click here), here is where we stand:
1. Interest rates returned to the same level as April 2022 – what is next?
With the inflation slightly dropping, interest is following the same trend. From a mortgage perspective, this is like music in your ears. Better interest rates lead to a higher borrowing capacity and lower monthly costs. For the next few months, many institutions expect the downward trend to continue. There is a rumor that the interest might drop by an extra 0.5% in the coming future. This could be argued if we consider the economic instability in current world events.
2. An approx. 27% mortgage applications increase since 2023 (according to HDN)
The increase in the amount of applications was mainly because of more first-time buyers and an uptick in second-time buyers deciding to take the plunge. Good to keep in mind that this increase affects the workflow for mortgage providers. Many lenders are currently dealing with longer processing times with their assessments (from 3 working days, up to more than 10 working days).
3. Better benefits for first-time buyers and happy singles
It turned out to become a good year for first-time buyers, according HDN (Hypotheken Data Netwerk) approx. 12% of the total mortgage applications were done by first-time buyers. This was helped by the fact that many first-time buyers don’t have to pay 2% transfer tax and singles can apply for an extra borrowing capacity.
4. Increased borrowing capacity with sustainability
The energy label of a home affects the borrowing capacity of consumers. To begin with, when purchasing a home, the better the label the home has, the more you can borrow. There are also options for you if you already own a home with a less attractive energy label, in these cases homeowners can apply for a sustainability depot. Alongside having a stronger borrowing capacity, you can also apply for a discount on the interest rate with highly rated homes. These new sustainability policies help, and we see more and more people are interested in sustainable homes or want to update the energy label of their current homes.
Housing Market
Mortgages are strongly tied to the housing market. While our expertise is on financial guidance, we tend to see a thing or two in the broader picture and we would love to share our thoughts about the housing market as well.
Important factors that drive house prices up are the ‘demand versus supply’ of homes and the ‘costs for borrowing money’ (the level of the mortgage interest rate).
1. Demand versus supply
You might have already read in the newspapers, the construction of new homes is not keeping up with the increase of demand. Even with the higher interest compared to 3 years ago, the prices of property have gone up to historic levels (the average purchase price is currently approx. € 486.150). According to market updates from financial institutions they expect prices will go up by 7.5% this year, and 5.0% in 2025.
2. Possible impact interest rates on price levels
In our opinion there are three scenarios:
- Interest rate will stay stable >> House prices will continue to increase because of excess demand versus limited supply.
- The interest rate will increase >> based on the last few years, the market will slightly slow down. However, people will have to deal with higher monthly costs for their mortgage.
- Interest rate will decrease >> positive news from a mortgage perspective, your monthly costs will go down. However, the downside (what we expect) is that the lower costs for a mortgage will accelerate the increase of property prices.
Long story short, as long as there is more demand than supply of homes, we expect prices will increase, therefore, we expect the positive benefits of lower interest will be nullified by higher housing prices.
3. Sustainability
The popularity of sustainable houses is on the rise. Based on regulation, and financial advantages, we expect this trend to continue. Investing in your home by making it more sustainable is not such a bad idea after all 😊
Spotting opportunities?
While you’re relaxing in your hammock and contemplating how to navigate the market, consider reaching out to us. We can outline your options and provide guidance, and we’d be happy to discuss them with you.
Do you have any questions?
