0% Mortgages: Is It The Future?

The Belgian 10-year rate is negative © Shutterstock

Since this summer, the Belgian 10-year rate has been negative. But does this also mean that mortgage rates will be reduced further?

Currently, the Belgian 10-year rate fluctuates around -0.30%. This rate had never been negative before. This means that investors are ready to pay to lend their money to the Belgian state for 10 years. And our country is not the only one. The rate is also negative in Germany, Switzerland, Denmark and the Netherlands. It results from the fear of a global recession, of a shrinking world economy. In recent weeks and months, several economic indicators have been activated, following which the European Central Bank (ECB) will probably adjust its main interest rate again in September.

Borrow

Although the 10-year rate has a huge impact on the mortgage rates banks grant, they are unlikely to drop much further. This was also demonstrated this summer by a survey organized by the newspaper L'Echo among several banks. Mortgage rates are already historically low and credit providers are running low on profit margins. They refer to several fees and taxes that they have to charge. In addition, the National Bank requires them to build up additional liquidity reserves in order to better protect themselves against possible mortgage loans that could not be repaid.

Are you still looking for a home? In this case, it is in your interest not to postpone this purchase in the hope that mortgage rates will drop considerably further. Did you take out a mortgage a few years ago? In this case, refinancing could be of interest to you.

Save

The 10-year rate also directs us to several long-term savings products. Some examples: savings certificates, term accounts or savings insurance (branch 21). As the Belgian long-term rate falls, banks will be able to further reduce the interest rates for these savings products.

The negative long-term rate will not have a significant impact on the rates of traditional savings accounts. Savings rates mainly depend on the ECB's short-term rate. This is also historically low and in the meantime many banks have already reduced the rate on their savings accounts to the legal minimum (0.11%). But in the event that the ECB cuts its main interest rate again in September, this could encourage many banks to still reduce the rates on their savings accounts which grant even more than the legal minimum.

Currently, only half of savings accounts grant a rate higher than 0.11%. The price breakers still grant a rate between 0.50% and 0.85%