Adelaer: 'It is now 1 to 1,5 percent cheaper to fix the interest rate for 5 or 10 years than to have variable financing.'

Adelaer: 'It is now 1 to 1,5 percent cheaper to fix the interest rate for 5 or 10 years than to have variable financing.'

In a market where interest rates had been rising sharply, a longer-term trend is now visible, with five- and ten-year interest rates stabilizing at lower levels. According to Daan Reekers of debt broker Adelaer, this means it may now be worthwhile to fix the interest rate for a longer period.

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The fact that it can be worthwhile to fix the interest rate for a longer period is due to the inverse interest rate policy, which currently has a difference of 1,5 percent between the three-month Euribor (variable interest rate) and the five-year fixed interest rate based on the IRS (capital market interest rate).

5-year interest rate, last week:

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Daan Reekers: "The five-year IRS interest rate has now fallen below 2,5 percent. Banks are buying this five-year IRS interest rate for about 1,5 percent lower than the variable rate. On a loan of five million euros, this immediately saves €75.000 per year in interest. Interest rates are unpredictable, but if the lower interest rate remains stable for an extended period, this often indicates that a significant reduction in that interest rate is not expected in the near future. General forecasts for the Euribor interest rate also assume that it will fall to this level in 2024.

10-year interest rate, last week:

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But not all banks directly reflect this difference in the purchase price in their rates. Reekers: "That's precisely why it's important to make a well-considered decision. It's important to examine not only the interest rate but also the surcharge. Due to increased market competition, we're seeing significant differences in this area among some providers. Choosing the right financing can save you a lot. Incidentally, the ten-year interest rate is now practically at the same level as the five-year rate. So why not fix it for longer and secure a longer term? After all, variable interest rates are volatile, while fixing the interest rate provides peace of mind. Yes, I can hear you thinking: but my current bank or provider won't allow this... That's precisely why a good comparison is important."

Euribor, 3-month interest rate, last week:

Penalty interest when refinancing

Variable financing often doesn't involve a penalty. And if it does, alternative financing might be so advantageous that the penalty is no longer relevant. Reekers: "Variable financing naturally offers the advantage of flexibility. But the trend is that the current surcharges charged by financiers are declining sharply. For example, the interest rate on a loan can even drop by more than 1,5 to 2 percent, which creates more flexibility in operations and negates refinancing costs."

Interest-only financing as an alternative?

By choosing interest-only financing, it's also possible to meet sustainability requirements and cover operating costs in these times of higher interest rates. Reekers explains: "We currently finance 80 percent of the refinancing issues we encounter in our practice through alternative means or with foreign providers. Unfortunately, the traditional Dutch major banks have little flexibility. The banks' strict regulations not only make the higher interest rates a bottleneck for many investors, but more importantly, adhering to the mandatory repayment requirement is a deal-breaker for them. In practice, for example, we've seen a client who wanted to refinance and received a 46 percent interest rate, with the interest rate almost quadrupling. The client also had the obligation to repay 50 percent annually. This, of course, caused many problems. We were ultimately able to arrange this financing with a foreign provider, with a 5 percent interest rate, a 4,5-year loan with an all-in interest rate of 10 percent." The customer could even opt for a 4,55-year interest rate at XNUMX percent.

Converting surplus value into liquidity

With foreign financiers, it's also easier to release any equity. Reekers: "We don't just finance with banking partners who have to consider the risks for the bank and upcoming Basel 4 legislation. However, with international pension or insurance funds, for example, better and more competitive rates with longer terms of seven to even more than ten years are possible. Much more is possible than people think, and the market is very dynamic."

Quality data makes better deals

But if investors and developers want to be bankable abroad, they must have their data under control. Foreign financiers are accustomed not only to working with cash flow models, but especially to data transparency. Reekers: "Because we have a digital search engine with over 2.200 providers, we know exactly what these parties require and can help our clients with that. It's about professionalism and 'being bankable' for the debtor; now and in the future. Digitizing financial processes is becoming more important every day. Access to data and its quality are more important than ever. We live in a wide world with access to money. But as a real estate professional, you also have to be financially professional."