The major central banks are likely to raise their key interest rates further in the coming months, which will also give money market interest rates a further boost. Still, there are signs that fixed-rate mortgage rates may have peaked. At least that’s what the mortgage broker Moneypark thinks.
In the first half of 2022, there was an enormous increase in capital market interest rates, which also had an impact on interest rates for fixed-rate mortgages, Moneypark explained in a communiqué on Wednesday. The reference rate for the ten-year term has risen by up to 2 percentage points this year.
Exaggerated interest rate expectations
And central banks would continue to tighten interest rates in the coming months to combat high inflation. But these rate hikes are already priced into fixed-rate mortgages, Moneypark wrote.
The last few weeks have shown that expectations of interest rate increases are exaggerated. Moneypark therefore considers it the “most likely” scenario that mortgage interest rates will remain at the current level over the next 18 months. In a historical context, interest rates would therefore still be at a low level.
Sinking again in 2023?
Another argument against higher interest rates is that a global recession is looming and further interest rate hikes could completely stall the economy. In addition, inflation cannot be fought with higher interest rates alone. Other factors such as energy or food shortages would weigh too heavily.
The guideline rate for two-year fixed-rate mortgages is currently 1.87 percent and for ten-year 2.67 percent. Moneypark thinks they should be in an interest rate range of 1.80 to 2.00 or 2.60 to 2.90 percent by the end of the year. In 2023, the interest rate range should then be somewhat lower at 1.60 to 1.80 or 2.30 to 2.70 percent.
Saron mortgages are still cheaper. The standard rate is currently 0.93 percent. Moneypark estimates a range of 0.95 to 1.10 percent by the end of 2022 and also for 2023.
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