Fixed vs. variable rates in the Dutch housing market.

When buying a home in the Netherlands, one of the most important financial choices you will face is whether to choose a fixed or variable mortgage interest rate. 

This important choice does not only determine your monthly mortgage payments, but also your long-term financial stability. For many internationals and first-time buyers, the Dutch mortgage market can feel unfamiliar and even overwhelming. That’s why understanding how these interest structures work, and what they mean for your borrowing power, is essential to making an informed choice.

As a financial adviser focused on sustainable and responsible lending, I believe that selecting the right interest structure isn’t just about short-term savings, but about ensuring long-term financial security.

How mortgage interest works in the Netherlands

In the Netherlands there are 2 main options to pick from: a variable rate or a fixed interest rate. Your mortgage type determines how your payments are structured overtime, but the interest type determines how stable or flexible your costs will be.

The 2 main mortgage products in the Netherlands are:

• Linear mortgage
• Annuity mortgage

Both of these options require regular payments of principal and interest, but there is one big difference. The difference between the 2 is the way the interest is calculated and adjusted, this depends on whether you have a fixed or variable interest rate.

Variable interest rates

When we take a closer look at variable interest rates, we see that it depends on the market. The rates that affect the variable interest rates are linked to short term market rates. On top of this there is a little margin for the bank as well. Choosing for a variable interest rate has some advantages and disadvantages. The advantages being:

• If the rates fall, your monthly payments decrease.
• Initial interest rates are lower than fixed rates.
• Variable interest rates offer more flexibility.

Variable interest rates also have a lot of disadvantages, the most important examples being:

• Your monthly costs can increase if the interest rate goes up.
• It creates a lot of difficulties for your long term finances.
• Some banks are very inconsistent with changing the interest rates.

Fixed interest rates

When we look at fixed interest rates, it is important to know what that means. A fixed interest rate means that that the interest you have to pay is the same for the whole length of the mortgage. The most common timeframe for a mortgage in the Netherlands is 30 years. A fixed interest has some advantages, the most important ones being:

• The monthly payment is predictable.
• If the interest rates on the short term market goes up, the monthly payment stays the same.
• Fixed interest rates are easier for your long term finances.

A fixed interest rate has some disadvantages as well, the most important ones being:

• If the interest rate on the market drops, you will not benefit from it.
• Longer fixed periods typically come with slightly higher interest rates.
• Early repayment can result in penalties.

Let’s take a look at an example to show the differences between fixed and variable interest rates. If you take a mortgage in 2024 with an interest of 2 percent, in 2025 this interest increases to 6 percent. For people with a variable mortgage this means a lot more costs, as they have to pay 6 percent interest now. For people with a fixed mortgage this change in interest rate does not matter. They will still pay the initial 2 percent interest rate. This results in much lower monthly costs, however the complete opposite can be the case as well.

How to pick the right option?

To help you pick the right option, there are certified mortgage advisers. They will look at your situation and determine what is the best. This way you will get advice that makes things clear and takes away all of your uncertainties.

My opinion

A mortgage is more than a loan, it is a long term commitment. Fixed rates offer stability, while variable offer flexibility. From my perspective as mortgage adviser, stability is often undervalued. You should not look at the short-term savings, but to long-term financial stability as well.