Ministers are considering the benefits of Dutch-style, long-term fixed mortgages for first-time buyers who are struggling to afford shorter-term fixes which are stressed at higher rates.
Floaters are cheaper at any given level of interest rates. With, of course, the problem that the rate might change. Fixed is more expensive at any given interest rate – with, of course, the benefit that the rate won’t change.
But that difference in cost isn’t going to go away just because some Minister wants it to. Floaters are cheaper and riskier.
This is even before we get to what happens next – who carries the risk of refinancing when rates decline?
Of course, it’s possible, sure it is. But it ain’t easy.
Dutch-style? Isn’t this also American-style long-term fixed mortgages? That wonderful wonderful American system that benefited borrowers and lenders so so well.
Predicting headlines in a decade or so along the lines of “Borrowers unfairly locked into expensive long term mortgages” as and when interest rates start falling again…
When rates decline you are stuck with the rate you agreed. Oddly enough, contracts on the continent are considered binding on both parties.
Either that or you pay an early repayment penalty of roughly what you would have paid in interest. So the borrower carries refinancing risk.
Isn’t this also American-style long-term fixed mortgages?
Actually, it’s a variant known as the subprime mortgage. Giving a fixed rate, long-term rate to someone who really can’t manage it.
I say you wogs go for it. Giving people mortgages who cannot afford them worked so well here in the States back in the 2000s.
Dutch-style, eh?
That means : If you can actually get a mortgage as a starter…
Going Dutch with the mortgage?
Does that mean the bank pays for half the house? Sounds good to me…
This isn’t about floating rate versus fixed rate, this is about offering long term fixed rate mortgages which will need government intervention because there is no commercial source widely offering such terms. Given the taxpayers’ exposure to govt playing fast and loose to the tune of however many hundreds of billions the money-printing and lockdown has cost why even bother to worry.
We really, really, need to start making politicians personally liable for the losses they cause us.
Are Dutch mortgages the ones under water when the wind stops blowing?
I have family and friends in the Netherlands. Fewer Dutch people buy houses, and those that do are often on interest-only mortgages. They literally didn’t understand when we mentioned that we’d paid off our mortgage so had no housing costs any more.
One couple sold the house and massively downsized so that they could pay cash for the new property with the equity gained from the sale.
Comparisons between countries are difficult – so many factors vary.
Grikath – I did find this;
https://assets.ctfassets.net/wfy6dr2scndo/4QBHiNlivK2v5OoCfJBHvm/bda387805fba2ac1c1f88f71558eaa5d/Dynamic_Credit_Quarterly_Update_2022-Q4.pdf
Which gives 60% owner occupied, 32% social (or regulated rent) and 8% unregulated, so sort of more like the UK than Germany for the owned:rented ratio, but where rented is dominated by controlled rent?
Anyway, that contains many interesting things, including;
“Average interest rate (10 year fixed / 100% LTV): The average interest rate decreased from
5.50% in 2008 to 1.50% in December 2021, yet it increased to 4.50% in December 2022.”
Blimey. 100% LTV fixed for 10 years?
Got an election date yet?
As “
I really hate the idea that we can cherry pick the way other countries do specific things, there’s normally some sort of path dependency why they do it and they have other problems because of it. I note in passing that 30 or 40 years ago the same claims were being made about Germany and yet Germany now also has a housing crisis.
Which is essentially the Fannie Mae and Freddie Mac problem all over again.
https://en.wikipedia.org/wiki/Federal_takeover_of_Fannie_Mae_and_Freddie_Mac
@Ducky Election date is November 22.
It’s funny.. In an attempt to “stop fragmentation and polarisation of the political landscape” ( their words..) GroenLinks and PvdA are going to have a combined list. Sort of LabourGreen fixed coalition for the peeps not up to speed with the dutch Circus at the moment.
The members still have to ratify him, but they plan to make Frans Timmermans, of all people, first candidate… mr. EuroEcoWoke himself…
That’s some attempt at “combating polarisation”… Like taking a bellows to a fire.. But that’s Politicians for you…
Germany has a housing crisis because of 8 years uncontrolled mass immigration (OK, same as UK), building codes pushing build costs up to an average over 3000 euro per square metre, so basically only luxury accommodation in expensive places can be profitably built, and most newly the threatened heating law, which makes almost every property in the country worthless.
New build has pretty much ground to a halt here for economic reasons plus the political risk of ownership having first become a thing. Just wait until “fit for 55” declares 95% of European buildings substandard and demands their demolition.
Note Germany has ultra-liberal planning rules. If you want to put something up that meets the rules the planning dept HAS to approve it and you can sue for permission if it is wrongly refused. Of course there are a lot of rules, but that isn’t the means by which building is restricted.