Third of homeowners perceive mortgage interest rate as high

Press release -

Nearly a third of Dutch mortgage holders feel they are paying a high or very high rate of interest on their mortgage. 83% of this group borrow at a rate of 4% or more. These are a few of the results from a survey that market researchers Gfk performed for ABN AMRO among 1,200 mortgage holders. Nearly four in ten respondents described the mortgage interest rate they pay as low or very low. Three quarters (74%) of this group borrow at a rate of less than 3%.

With the average mortgage interest rate currently around 2.3%, it can be worthwhile to refinance the mortgage, especially if it was taken out more than four years ago. Of the mortgage holders who took out their mortgage more than four years ago and perceive the mortgage rate they pay as being high or very high, 77% have considered refinancing, while 15% actually plan to refinance or have already done so. The remainder are unsure (16%) or have decided not to refinance their mortgage (46%). Of the group of respondents who described their own mortgage interest rate as low or very low, 33% have already refinanced the mortgage.

More to a mortgage than interest

Anton Bosch, ABN AMRO’s Director for Mortgages observes, "Can we conclude that some mortgage holders are missing an opportunity to save money if they don’t investigate the option of refinancing? Let’s not jump to conclusions here. There’s more to a mortgage than the interest rate you pay. You need to consider possible drawbacks of taking out a new loan, like different terms and conditions and extra costs. On the other hand, current interest rates are indeed very low. We don’t rule out a rate rise going forward. In that case, newcomers to the housing market will be faced with climbing mortgage interest rates."

Lower monthly costs

For those mortgage holders who have refinanced in the past two years, the key driver was reducing monthly costs (named by 45%). Also named by nearly a quarter as their main reason is wishing to take advantage of lower mortgage rates. A small group (15%) say that better conditions – in addition to a lower mortgage rate – played a leading role in the decision to refinance. Of those mortgage holders who do not wish to refinance, a quarter state the main reason is that refinancing delivers little or no financial gain. An almost equally large group (22%) name the costs related to early redemption of the mortgage (i.e. penalty interest) as the main obstacle to refinancing. Of the mortgage holders who have refinanced in the past two years, four out of five chose a mortgage offered by another party.

Confusion about cost of early redemption

By far most mortgage holders confirm that – at least in general terms – they know enough about refinancing and the conditions that apply. There is often confusion, however, about what they need to pay to the bank in connection with early redemption of the mortgage. Half of mortgage holders mistakenly assume that refinancing always involves costs. Bosch: "Early redemption only costs money if your current mortgage rate is higher than the refinanced rate. After all, when a mortgage is redeemed, the bank can lend the money to a new borrower, but the interest rate will be lower. Still, refinancing can be worthwhile, if the reduction in monthly costs makes up for the refinancing costs."

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