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The rise in inflation decreases the purchasing power of money, which encourages lenders to increase their interest rates to maintain their profits.
Inflation
The European Central Bank's monetary policy significantly affects mortgage interest rates. The ECB can raise interest rates for short and extended periods, thereby influencing mortgage interest rates at the national level.
Monetary policy
Market demand is an economic factor that can also impact mortgage interest rates. If the demand for mortgages is strong, lenders may raise interest rates to curb the influx of loan applications they receive.
Market demand
In times of economic growth, interest rates generally trend upward. A rise in mortgage interest rates signals renewed buyer confidence, accompanied by increasing income and a strong labour market, which can foster inflation over the long term. Moreover, higher mortgage rates suggest that investors are more at ease shifting their funds away from the haven of bonds and toward more risky investments like stocks.
Healthy economy
Lower interest rates do not always mean the best borrowing conditions. Different variables can impact your mortgage amount, not only the interest rate. Focusing only on your mortgage rate shifts your attention away from the loan's actual cost, which can be costly.
Borrowing conditions
International events such as political instability or a major economic crisis in another country can also affect interest rates.
Global events
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