Homeowners Face Higher Monthly Payments as Fixed-Rate Mortgages Expire
Homeowners who secured mortgages over the past decade are now experiencing increased monthly payments as their fixed-rate terms come to an end following recent interest rate hikes. However, according to De Hypotheker, the impact is less drastic than initially expected due to the rise in mortgage tax deductions.
Recent Interest Rate Trends
Interest rates remained exceptionally low between 2016 and 2021. Since then, the average ten-year mortgage rate without the National Mortgage Guarantee (NHG) has surged more than 3 percentage points, from 1.05% to 4.07%.
Mortgage Characteristics and Impact
During the low-rate period, approximately 16% of mortgages were fixed for up to ten years, De Hypotheker reports. The advisory firm’s analysis shows that homeowners with partially interest-only mortgages face the most significant payment increases.
- A couple who took a €450,000 mortgage in 2016 at 2.4% fixed for ten years, including €200,000 interest-only, would see their monthly payments rise by €206 under the current average 4.05% rate.
- Without the benefit of the increased mortgage interest deduction, their payments would have jumped by €430.
Mark de Rijke, commercial director at De Hypotheker, summarizes: "The impact of the higher interest rates on households seems generally manageable."
Author's summary: Rising rates increase mortgage payments for many, but enhanced tax deductions help keep the financial strain on homeowners within manageable limits.