How does the mortgage interest rate develop in March? We give our mortgage interest expectation based on current market developments.
The mortgage interest rate broke a new low record in February. The average 10-year interest rate has fallen below 2%. The lowest 10-year mortgage interest rate is even a few tenths below that. The mortgage interest rate also fell for the other fixed-rate periods.
With the reduction, lenders follow interest rates on the money market and the capital market. These market rates have fallen further in the past month. The financial markets anticipate, among other things, new measures by the European Central Bank (ECB). This determines this mortgage interest rate expectation.
However, the inflation target of the ECB is becoming increasingly out of sight. In February there was even negative growth (deflation). This was the first time since September 2015. Among other things, the low oil price is affecting the ECB, but growth is also limited outside energy prices.
President Draghi already indicated in January that the central bank is prepared to expand the current package of measures. The ECB wants to achieve the desired growth (inflation) of 2% at all costs. On 10 March the ECB met on new crisis measures for the economy in the Eurozone. It was decided to further reduce the policy interest rates and to intensify the buy-up program.
Deflation in the Eurozone is just one of recent disappointments for investors. Earlier there were concerns about the Chinese economy and disappointing figures from the US. Investors seek refuge in safe investments and demand at low market interest rate. This in particular has a depressing effect on the capital market interest rate.
The interest rates on the money market and the capital market will remain low for the time being and possibly fall further. These are important indicators of mortgage interest. Our expectation is that: