Why higher mortgage rates aren’t a disaster for Dutch homebuyers

When buying a house in the Netherlands, tracking interest rate trends can leave many expats uncertain about the best time to act. And if you've been following the Dutch housing market this summer, then you may have noticed something strange.

With the European Central Bank (ECB) deciding not to raise interest rates in July, many people expected mortgage rates to remain stable. But this has not happened.

Across the housing market, we have seen mortgage rates increase for both shorter and longer fixed-interest periods. This raises all kinds of questions for buyers and industry experts: Has borrowing suddenly become more expensive? Is this the wrong time to buy?

How Dutch lenders actually set mortgage rates

One of the biggest misconceptions about Dutch mortgage rates is that they move directly in line with the ECB interest rate, which is currently sitting at 2,2 percent.

In reality, mortgage lenders in the Netherlands price their rates on a combination of factors, including capital market developments, long-term funding costs, inflation expectations and risk premiums.

That means that even if the ECB keeps its key interest rate unchanged, Dutch banks may still decide to increase mortgage rates when their own funding becomes more expensive or if they expect the market to change. That's exactly what has happened in the Netherlands this summer.

So what does this mean for anyone wanting to buy a property in the Netherlands? Higher mortgage rates generally mean that your monthly payments become more expensive and that you can borrow less money. However, in the Netherlands, this mortgage interest rate rise doesn’t necessarily mean potential home buyers are in a worse position.

Less competition gives buyers back their bargaining power

In recent years, one of the biggest challenges in the Dutch housing market has not been the mortgage rate but rather finding a potential home.

Many buyers share that they spent months searching for a property, competing against dozens of others and offering well above the asking price with little room for negotiation.

However, in the past few weeks, we have started to see signs of a slightly different market.

A record number of properties went on sale in the Netherlands between April and June this year, according to the estate agent association NVM. Particularly for properties listed below €500.000, buyers have more options to choose from, time to compare and, in some cases, more room to negotiate.

Sadly, this does not necessarily mean that the Dutch housing market is suddenly fixed. House prices are still at a historic high, and there is more demand than supply in many regions. Nevertheless, compared to earlier this year, homebuyers have a little more power.

Looking beyond rates: Leveraging your financial position

A successful home purchase depends on more than just getting the lowest possible mortgage rate.

Consider this: is it better to pay 0,2 percent less interest while bidding €30.000 more than a house is worth because of fierce competition? We’d say you are better off with a slightly higher mortgage rate and a more realistic purchase price.

You are also competing against people who might be borrowing 100 percent of the purchase price. This means that if mortgage rates increase and you have savings to invest, you are in a stronger position than other potential property buyers.

Don’t forget that homebuyers in the Netherlands can also still benefit from partial tax relief through the mortgage interest deduction (Hypotheekrenteaftrek), offsetting the impact of any mortgage rate rise.

Navigating the Dutch property market as an international

For internationals, it is always challenging to find the right time to buy a home. You might be balancing relocation plans, visa timelines, changing employment situations or family commitments. Waiting for the "perfect" moment often isn't realistic.

Instead of trying to predict where mortgage rates will be in six months' time, it's usually better to understand what you can comfortably afford today, how competitive the local market is where you want to live and your best financing options.

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Turning higher interest rates into an opportunity

So yes, mortgage rates in the Netherlands have increased despite the ECB leaving its policy rate unchanged, which at first glance may seem like negative news.

But with more properties becoming available across the country and buying competition easing in certain price segments, today's homebuyers may find opportunities that simply weren't there earlier this year. 

Buying a home, especially in a new country, should always be about making a well-informed decision based on your financial situation, your future plans and the market that's in front of you. Sometimes, a slightly higher mortgage rate can deliver you the keys to your perfect home.