Mortgate rates in Belgium will almost certainly not increase next year, experts say, as declining inflation throughout the eurozone makes further interest rate hikes by the European Central Bank (ECB) increasingly unlikely.
According to Immotheker Finotheker, a real estate consultancy, the average rate for a 20-year fixed-rate mortgage for which 80% of the home's purchase value is borrowed is currently 3.77%, up 0.25 percentage points compared to last year.
Speaking to L'Echo, analysts noted that they do not expect further mortgage rate rises over the coming year. "It seems that interest rates are stabilising at this high level," said Immotheker Finotheker CEO John Romain.
His words were echoed by Johan Van Gompel, a Senior Economist at KBC, who also warned that mortgage rates were unlikely to decline significantly for the foreseeable future.
"For mortgage rates, taking into account all commercial considerations, a further increase in interest rates is not to be expected," he said. "But the hope of a sharp fall in these interest rates seems equally improbable."
Unforeseen circumstances?
Romain also suggested that the only conceivable scenarios which could lead mortgage rates to increase would be an escalation of Russia's ongoing invasion of Ukraine or the conflict between Israel and Hamas in Gaza. This, he said, could cause energy prices to surge, thereby potentially triggering further ECB rate hikes – and, hence, higher mortgage rates.
"No one can predict how the conflicts in Ukraine and Israel will develop," he noted. "The slightest escalation could trigger a new energy crisis, and therefore a spike in prices. Moreover, inflation expectations influence long-term interest rates upwards. The evolution of the geopolitical situation could therefore affect these rates."
The ECB has hiked rates on ten occasions over the past 18 months in its efforts to curb soaring prices, bringing its benchmark deposit facility rate to a record high of 4%.
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Remarkably, the ensuing surge in mortgage rates has yet to cause a decline in house prices. However, a study published on Thursday by Statbel, Belgium's official statistics office, found that the rate of house price increases has slowed considerably over the past year.
In particular, prices for detached houses are up 1.4% in the third quarter of this year relative to the same period last year – down from 4.3% from 2021 to 2022. The price increase rate for apartments also fell, from 5.9% to 2.1%, over the same period.
The Statbel study was published on the same day that the ECB announced that it would keep its key interest rates unchanged and downwardly revised its eurozone inflation forecasts for this and next year by 0.2% and 0.5%, respectively.
Romain added that, as inflation gradually declines, mortgage rates will also begin to fall over the next few years. "Interest rates will thus gradually return to their pre-Covid crisis levels," he said. "Mortgage rates will naturally follow."
