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Mortgage news: Penalties, interest-rate expectations and the NHG limit in 201711 April 2017, by Henk van Seijen
Finsens specialises in financial planning for individuals and families in the Netherlands and provides full support during the entire mortgage process, from start to finish.
Rules concerning mortgages change regularly, so it's important to stay up to date. This article will feature information about mortgages including the recalculations of penalty interests, what interest rates will be doing in 2017 and the new maximum purchase price of a property for NHG-backed mortgages.
On March 20, the Dutch Financial Markets Authority of AFM (Autoriteit Financiële Markten) published a set of guidelines containing rules for banks to calculate penalty interest rates more fairly when mortgages are prematurely redeemed.
Research has shown that in many cases, banks calculate excessively high penalty interest rates. Penalty interest usually does not apply in the event that the mortgage is redeemed as part of the sale of the property; in such cases, most banks allow penalty-free redemption of the mortgage.
The new AFM calculation rules do not apply to the penalty interest levelled in the event of interest revision using the average of one’s original rate and the current market rate.
Banks will be recalculating the penalties for all mortgage switches made after July 14, 2016. Most banks have indicated that they will be informing their clients of the issue in the coming months. ABN AMRO is giving itself a bit more time, claiming their clients will be informed within a year.
Due to European legislation on the matter, banks are currently obligated to recalculate the penalties. Banks will not be recalculating the penalty interest rates for any mortgage switches (and penalty interest calculations) made prior to July 14, 2016.
Interest rate expectations
For the first time, the inflation objective of 2 percent was met in February. However, the economy is not showing any real signs of strengthening yet. At the end of 2016, the ECB (European Central Bank) extended its buy-back programme to December 2017.
Unlike the sharp decrease in interest rates like in 2016, the EU’s monetary policy will curb mortgage interest rates again in 2017.
On the other hand, interest rates will remain unpredictable this year. Despite this, the maximum difference between the highest and lowest interest rate thus far is only 0,3 percent.
ABN AMRO expects the flat, 10-year interest rate to be around 0,5 percent higher by the end of 2017.
Mortgages with National Mortgage Guarantee (NHG)
The lowest interest rates are offered to mortgages which fall under the Dutch National Mortgage Guarantee scheme. Compared to mortgages at property market value, the annual difference is around 0,5 percent.
However, NHG-backed mortgages require homeowners to pay a one-off 1 percent fee. A NHG-backed mortgage is possible if the purchase price of the property does not exceed 245.000 euros.
In 2016, the maximum purchase price was set at 231.132 euros. As such, 2017 marks an increase in this maximum purchase price for the first time since it started decreasing in 2012.
Do you need more information about your own particular situation? Contact Henk van Seijen, a partner at Finsens, providing specialist services to expats in the areas of tax, mortgages, pensions and investment advice.