Consumers pay thousands of euros too much in mortgage interest. This is the result of own research by the independent comparison site Lender Consumers who take out a mortgage for the first time often receive a discount on the mortgage interest for the first fixed-rate period.
Interest rate discounts lead to wrong choice of lender
This discount is usually not stated in the quotation or in the financial information leaflet. As a result, consumers opt for the lowest interest rate in the first fixed-interest period instead of the lowest interest charges over the total term. It is therefore of great importance to compare products well with each other, also on conditions.
When extending the fixed-rate period, consumers are offered a higher interest rate than new customers. It is expensive for these consumers to go to another lender. Switching to another lender means considerable notary, appraisal and closing costs.
Consumers who want a mortgage with a short fixed-rate period of, for example, 5, 6 or 10 years run the greatest risk of choosing the wrong mortgage. Starters in particular more often opt for a short fixed-rate period because otherwise they will not get the financing properly.
On 6 February, the following interest rates for a fixed-rate period of 6 years applied to an interest-only mortgage with a National Mortgage Guarantee. Assuming a mortgage amount of 250,000 euros and a constant interest rate for the entire term, this produces the following results:
Lowest interest% Interest% 6yrs Interest discount 1st 6yrs Interest 1st 6yrs Interest remainder. duration Total entire term SNS Budget 4.3% 0.3% 64,500 276,000 340,500 DBV Insurance 4.35% 0.0% 65,250 261,000 326,250 MoneYou Complete 4.35% 0.1% 65,250 267,000 332,250 Obvion Basis 4.4% 0 , 0% 66,000 264,000 330,000 AXA Benefit 4.4% 0.2% 66,000 276,000 342,000 Erasmus interest rate 4.45% 0.0% 66,750 267,000 333,750 Postbank Benefit 4.5% 0.4% 67,500 294,000 361,500
Based on the interest rate alone, an SNS Budget Mortgage might be chosen. SNS Bank applies an interest discount of up to 0.3% for the first fixed-rate period. There is no interest discount on DBV Insurance, Obvion and Erasmus companies. When looking at the total interest payment during the entire term, the following picture emerges:
Lowest interest charges for the entire duration Interest% 6yrs Interest discount 1st 6yrs Interest 1st 6yrs Interest remainder. duration Total entire term DBV Insurance 4.35% 0.0% 65,250 261,000 326,250 Obvion Basis 4.4% 0.0% 66,000 264,000 330,000 MoneYou Complete 4.35% 0.1% 65,250 267,000 332,250 Erasmus Professional interest rate 4.45% 0 , 0% 66,750 267,000 333,750 SNS Budget 4.3% 0.3% 64,500 276,000 340,500 AXA Benefit 4.4% 0.2% 66,000 276,000 342,000 Postbank Benefit 4.5% 0.4% 67,500 294,000 361,500
The interest costs of the mortgage lender with the lowest interest rate (SNS Budget) are no less than 14,250 euros higher than the costs of the cheapest mortgage lender (DBV Insurance)!
In a 2004 study commissioned by the Ministry of Finance into market forces in the mortgage lending market, it was recommended to improve the provision of information regarding interest rate discounts. With most mortgage lenders, only the conditions in small letters state that there may be an interest rate discount. Recently, the NVA and the Association of Mortgage Advisers in the Netherlands also sent a letter to the Ministry of Finance in order to provide better information and more transparency about the entry and renewal rates for mortgages.