Longer fixed-interest period for residential mortgages more popular

Statistical news
Datum 4 mei 2016

Dutch households increasingly opt for longer fixed-interest periods when taking out a new residential mortgage loan with Dutch banks, possibly also due to the low interest rates. In March 2016, the majority of Dutch households (52%) opted for a fixed-interest period of between five and ten years when taking out a new mortgage or renegotiating their existing loan. Another 20.5% preferred a fixed-interest period of more than ten years. The remaining new mortgages contracted had fixed-rate periods of up to one year (15%) or between one and five years (12.5%).

The preferred fixed-interest period has increased over the past years (see Chart 1). The percentage of Dutch households opting for a fixed-interest period of ten years or more was significantly higher in 2015 (16%) than in 2014 (6%). The number of newly contracted mortgage loans with a fixed-interest period of five to ten years also increased, from 39% to 52%.

The preference for longer fixed-interest periods for new residential mortgages has been higher with households in the euro area than with Dutch households for some time now (see Chart 1). Almost half (47%) of the households in the euro area opted for a fixed-interest period of ten years or more. Another 22% chose a fixed-interest period between five and ten years. A fixed-interest period between one and five years was opted for by 10%, and 21% preferred a fixed-interest period of up to one year.

Chart 1: Households' fixed-interest period preferences for new residential mortgages in the Netherlands and the euro area

Chart 1: Households' fixed-interest period preferences for new residential mortgages in the Netherlands and the euro area

Interest rates for fixed-interest periods in the Netherlands and the euro area

In March 2016, Dutch households held EUR 517.6 billion in mortgage loans from Dutch banks. That same month, new mortgage loans worth almost EUR 10 billion were extended in the Netherlands, at an average interest rate of 2.69%.

The average interest rate for new residential mortgages in the euro area as a whole stood at 2.22%, some 55 basis points lower than in the Netherlands (2.77%). Looking at the rates for the different fixed-interest periods, the Netherlands and the euro area are slowly converging with respect to new residential mortgages with a longer fixed-interest period (see Chart 2). In February 2014, the euro area rate for fixed-interest periods of more than ten years was on average 1.4 percentage points below the rate in the Netherlands. In February 2016, however, this difference was down to 0.8 percentage points. The preferences for longer fixed-interest periods as well as the rates for these longer fixed-interest periods in the Netherlands and the euro area are gradually converging. The lower the rates, the longer the preferred fixed-interest period for new residential mortgages.

Chart 2: Rates for new residential mortgages with longer fixed-interest periods in the Netherlands and the euro area

Chart 2: Rates for new residential mortgages with longer fixed-interest periods in the Netherlands and the euro area