The mortgage interest rate is rising. You would expect that interest rates will now also rise. However, this is not the case. We discuss the background of savings interest development.
Negative savings interest closer
Anyone who has had a house for a number of years knows: if the mortgage interest is high, then the savings interest is also high. In recent years, interest rates on borrowing and saving have fallen.
The savings interest rate has now fallen to such an extent that a negative savings interest rate is close by. A lowest interest rate for saving of 0% has now been reached.
The mortgage interest rate is expected to rise
We expect the mortgage interest to rise in the long term. Many Dutch people still benefit quickly by setting the low mortgage interest rate. At the same time, we are looking forward with great interest to the first interest rate increase for saving. However, savings rates remain low and even fall slightly further. How is this possible?
Why does the interest rate not rise?
To answer this question, we look at the market rates that influence the mortgage interest rate and the savings interest rate:
- Banks buy in money to borrow again. The price for long term loans is determined on the capital market.
- Your savings do not lie in a safe at the bank, but are ‘stored’ by the bank in the money market, here it is a question of supply and demand for short-term loans.
The capital market interest rate has risen slightly since October. This market interest rate is partly influenced by international trade. Investors are gaining confidence now that the global economy is on the rise. The election of Trump and his promise to invest more also gives the capital market a boost. This boosts the mortgage interest.
The money market is more influenced by central banks. The Eurotral Bank keeps its policy rates low to stimulate the economy. This makes borrowing and spending money attractive and saving unattractive. The Euribor interest rate has been in a downward trend. The savings interest rate will fall further as a result.
Will the interest rate rise again?
If global economic growth continues, savings rates will also rise again in the long term. Investors are simply more opportunistic and respond faster to positive signals from the market. Policy makers, such as the Eurotral Bank, are more focused on the long term. Only when economic growth is sufficiently certain will they adjust the low interest rate policy.
This also means that it is not yet certain that the current rising trend is definitive. Uncertainty and a new setback may ensure that the rates for saving and borrowing remain low for a long time. So it remains interesting to keep an eye on the savings rate expectation and the development of the mortgage interest.