Higher mortgage interest rates will gradually feed through to existing homeowners’ monthly payments over the coming years. For Dutch households with a variable-rate mortgage or a mortgage whose interest rate is due to reset by the end of 2028, gross monthly mortgage payments are estimated to increase by €150 on average. Most households appear able to manage this increase, but some may come under financial pressure. These are the findings of an analysis by De Nederlandsche Bank (DNB), based on mortgage data from banks.
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Mortgage interest rates have risen significantly in recent years. Five years ago, the average interest rate on new mortgages was around 1.6%, compared with nearly 4% today. First-time buyers feel the impact immediately: higher mortgage interest rates mean they can borrow less.
For many existing homeowners, the situation is different. Their mortgage interest rate is fixed for a longer period, so they have yet to feel the full impact of higher rates. When their fixed-rate period ends, however, their new interest rate could be considerably higher, particularly if they took out their mortgage when rates were historically low.
DNB is examining this development because higher mortgage costs could make households more financially vulnerable. If households struggle to make their mortgage payments, this could also have consequences for mortgage lenders.
Of the outstanding mortgage debt held by banks, 3% has a variable interest rate and 16% is due for an interest rate reset by the end of 2028. Together, these account for 19% of the outstanding mortgage debt.
At the current level of mortgage interest rates, a rate reset would lead to a higher interest rate in almost all cases. For around 11% of outstanding mortgage debt, or around 950,000 households, the increase could exceed two percentage points.
Gross monthly mortgage payments are estimated to increase by €150 on average. However, the increases vary widely: a quarter of these households face an increase of less than €50, while another quarter face an increase of more than €300 a month. Mortgage interest tax relief may reduce the increase in net monthly costs, but differences in this relief have not been taken into account in the calculation.
After the interest rate reset, these households would spend a larger share of their income on their mortgage. On average, gross mortgage costs are estimated to rise from 20% to 24% of net income. The calculation assumes that household income has increased in line with average wage growth since the mortgage was taken out.
International organisations, such as the OECD and the ECB, view housing costs above 40% of net income as a sign of potential financial vulnerability. This threshold is only a guide: whether households can manage higher costs also depends on their financial circumstances and other spending.
Most households would remain below this threshold after the interest rate reset. However, the share of households with relatively high mortgage payments would increase. Among the households studied with a variable-rate mortgage or a rate reset due by the end of 2028, 8% would spend more than 40% of their net income on mortgage payments after the reset, compared with 4% before it. This represents around 60,000 households after the reset, compared with 30,000 before it.
Most households appear able to manage the higher costs partly because their financial position has improved. Wages have risen sharply in recent years, while mortgage debt has fallen relative to income and property values. The share of interest-only mortgages has also fallen (see the DNB-AFM Lending Standards Monitor).
However, not all households are in this position. Those facing a sharp rise in mortgage payments alongside a weaker financial position or a fall in income – for example, due to unemployment or retirement – may come under financial pressure.
Higher mortgage interest rates do not affect everyone’s monthly payments at the same time. For most outstanding mortgage debt, the next interest rate reset is further ahead: 27% is due to reset between 2029 and 2033, and 48% after 2033. More households may therefore face higher monthly payments after 2028 if interest rates are higher when their fixed-rate period ends.
This gradual effect reflects the long fixed-rate periods of Dutch mortgages. During 2019-2022 in particular, when mortgage interest rates were historically low, households often opted for fixed-rate periods of more than ten years. Since 2022, there has been a noticeable shift towards fixed-rate periods of five to ten years for new mortgages (see the DNB-AFM Lending Standards Monitor). As a result, changes in interest rates may feed through to monthly payments on these mortgages sooner in the future.
Around 950,000 households have at least one mortgage with a variable interest rate or an interest rate reset due by the end of 2028.
The study covers approximately 755,000 of these households, for which sufficient information is available.
Income data is available for a subset of these households The results have been weighted to make them representative of the group of 755,000 households.
International organisations, such as the OECD, Eurostat and the ECB, use 40% of disposable income as an indicator of comparatively high housing costs. Definitions of housing costs and income vary. The narrower OECD measure, which includes interest payments and principal repayments, is the closest match to our calculation.
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