- The average mortgage interest rate has fallen since November last year, but there is a wide variation between rates from different lenders.
- For example, the most popular 10-year fixed rate has a difference of more than 1 percentage point between the highest and lowest mortgage rates.
- Business Insider examines the difference in monthly costs when you choose the lowest interest rate.
- Also Read: How to Smartly Save Energy, Healthcare, Internet and 4 Other Fixed Costs in 2024
Average mortgage rates have fallen significantly since November last year, which is of course good news for homeowners who need to decide on a new mortgage rate. However, the wave of lower mortgage rates appears to have stalled last week as some lenders have begun cautiously raising rates again.
In any case, competition in the homeowner mortgage market means that there can be large differences between lenders in the mortgage rates they offer on comparable terms. Choosing the highest or lowest interest rate on the market can make a significant difference in monthly costs.
Last week, Business Insider wrote about how choosing the cheapest option can save you on fixed costs. These were recurring costs, for example for insurance, energy, internet and television as well as subscriptions.
We had ignored the mortgage because it is a long-term contract where you can only opt for a lower interest rate when you buy a new house or the fixed rate period expires.
But the mortgage obviously has a big impact on your household budget. Business Insider calculates the difference it makes if you choose the highest or lowest interest rate on the market.
The average mortgage interest rate for a 10-year fixed term with NHG insurance rose from 1 percent to around 4 percent at the beginning of 2022. In 2023, interest rates fluctuated between 4 and 4.5 percent.
The interest rate set for 10 years at NHG falls below 4 percent
Since October last year, mortgage rates have fallen quite significantly and the 10-year NHG interest rate has fallen below 4 percent. The following table from Van Bruggen Adviesgroep shows the current average mortgage interest rates for different interest rate lock-in periods, with and without NHG insurance.
Quelle: Van Bruggen Advisory Group
This shows that the average mortgage interest rate for the popular interest rate fixation period of 10 years is 3.78 percent for mortgages with NHG insurance and 4.28 percent for mortgages that are taken out at 100 percent of the home value.
In addition, the table also shows the highest and lowest interest rates in the market. It can be seen that there is a difference of more than 1 percentage point between the highest and lowest interest rates for 10 years with and without NHG.
With this tool from berekenhet.nl you can calculate the difference in monthly costs. We set the highest and lowest interest rates for 10 years with and without NHG insurance.
High and low mortgage interest rates: difference in monthly costs
We start with mortgages with NHG insurance. With NHG insurance, you are covered under certain conditions against a remaining debt if the property has to be offered for sale because there are payment difficulties due to death, disability or divorce.
In 2024, home buyers will be able to take out NHG insurance for mortgage loans up to 435,000 euros. You pay a one-off premium of 0.6 percent of the purchase price. On the other hand, the interest rates for NHG mortgages are relatively low due to the lower risk for the bank.
Assuming you take out an annuity mortgage for 350,000 euros at the lowest NHG interest rate of 3.6 percent for 10 years, then the gross monthly costs (i.e. without mortgage interest deduction) are 1,591 euros.
The monthly net costs, taking into account the tax advantage of the mortgage interest deduction in the first year, are 1,182 euros.
If you take out the same mortgage for €350,000 from another lender that offers the highest interest rate on the market at 4.69 percent, you will have to spend a gross amount of €1,813 per month. You pay a net amount of 1,265 euros in the first year.
In short: With a mortgage interest rate fixed for 10 years, you can save 222 euros gross per month with NHG insurance. If you take the mortgage interest deduction into account, you will have to spend 83 euros less per month on mortgage costs in the first year.
Continue to mortgages without NHG. Suppose you buy a house for 500,000 euros and take out a mortgage with 4.05 percent interest from the cheapest provider. According to berekenhet.nl, in the first year you pay 2,402 euros gross per month and 1,735 euros net.
If you take out a mortgage from a competitor at a maximum interest rate of 5.1 percent, you will spend 2,715 euros gross and 1,875 euros net per month.
In short: With a mortgage for 100 percent of the house value and an interest rate fixation period of 10 years, you can save 313 euros gross per month. The net amount is 140 euros in the first year.
Of course, it is still important to pay attention not only to the mortgage interest rate, but also to other conditions. For example, a lower interest rate may come with stricter conditions if, for example, you move and want to take interest with you.
READ ALSO: How to Smartly Save Energy, Healthcare, Internet and 4 Other Fixed Costs in 2024
2024-01-24 06:41:44
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