The mortgage market in the Netherlands
Kop-Munt, Saturday, 21 October 2017
No other country in Europe has as many homeowners as the Netherlands. More than six out of seven homeowners have a mortgage on their house. In Belgium, this is four out of seven, and that is still high in Europe. In Germany, for example, only half of the houses occupied by the owners have a mortgage. In Poland, this is only true in one out of eight cases. The tax rebate on mortgage interest encouraged Dutch homeowners not to repay their mortgage. That is why this happened much less frequently than in other countries.
Debt Discipline compensates relatively high Loan to Value
The criticism of the high maximum LTV in the Netherlands has been heard frequently. Where elsewhere in Europe, the LTV amounts to a maximum of 80 percent for new mortgages, in the Netherlands, it was 101 percent last year and must have been reduced to 100 percent next year. The idea is that individuals are more at risk with a high LTV, but in relative terms, the Netherlands has a low percentage of defaults due to the national debt discipline mentality. The Dutch Home Owners' Association explained why there is not so much wrong with the Dutch system. Nevertheless, financial analysts abroad - and in particular those of financial supervisors - are pleased that restrictions were introduced in 2013. The newly announced government measures have been well received in London from a macroeconomic point of view.
Large pension savings on outstanding mortgage debt
At the end of 2016, 664 billion residential mortgages were outstanding in the Netherlands. This makes the Netherlands the fourth largest mortgage market in the EU, after the United Kingdom, Germany, and France. Against this relatively high collective mortgage debt, there is one of the highest pension savings in the world. In 2016, the pension capital amounted to 168 percent of the gross domestic product, the proportionally highest in the world. The Dutch National Statistics Office calculated the pension assets in 2016 at more than 1,700 billion euros, some 2.5 times the outstanding amount of mortgage debt.
In the Netherlands, refinancing a mortgage is more popular than the EU average. Because the mortgages run longer and involve a larger debt, it is worthwhile for Dutch consumers to change their mortgage provider during the term.
Interest rates haven’t reached the bottom
Analysts expect the housing market in the Netherlands to continue to flourish for the time being due to the growing economy and increasing consumer confidence. Rising prices are not yet a problem for consumers: mortgage interest rates in the Netherlands are still historically low. Whereas interest rates have reached the bottom elsewhere in Europe, this does not seem to be the case in the Netherlands yet. Figures from the European Mortgage Federation show that the average interest rate on a new mortgage in the Netherlands last year was 2.59 percent, compared with 1.26 percent in France or 1.16 percent in Finland. The Netherlands is therefore among the top five countries with the highest interest rates in the European Union.
Nevertheless, short fixed-interest periods have lost popularity in the Netherlands since 2006, in favor of mortgages with a fixed-interest period of five years or more.
Healthy and attractive
The Dutch mortgage market is considered by financial analysts to be healthy and attractive. The value of real estate is relatively stable, the debt discipline is one of the highest in Europe, and the risks for lenders are relatively low due, for example, to the
Also, economic factors are favorable. The Netherlands has one of the lowest youth unemployment rates in Europe (the Czech Republic and Germany alone perform better), and the population is expected to grow between 0 and 5% (in the three major cities between 5% and 25%) where countries such as Germany and Spain are shrinking.
To meet demand, the Netherlands would have to build more houses than is currently the case, and further pressure on the housing market is expected. This means that mortgage providers will see their turnover increase, although the Dutch market is highly competitive. And that is good for the consumer again: healthy competition keeps the costs of taking out a mortgage in the Netherlands lower than average.
This article of is subject to a license. Based on . Translated from the Dutch language
by Jos Deuling.
No other country in Europe has as many homeowners as the Netherlands. More than six out of seven homeowners have a mortgage on their house. In Belgium, this is four out of seven, and that is still high in Europe. In Germany, for example, only half of the houses occupied by the owners have a mortgage. In Poland, this is only true in one out of eight cases. The tax rebate on mortgage interest encouraged Dutch homeowners not to repay their mortgage. That is why this happened much less frequently than in other countries.
Debt Discipline compensates relatively high Loan to Value
The criticism of the high maximum LTV in the Netherlands has been heard frequently. Where elsewhere in Europe, the LTV amounts to a maximum of 80 percent for new mortgages, in the Netherlands, it was 101 percent last year and must have been reduced to 100 percent next year. The idea is that individuals are more at risk with a high LTV, but in relative terms, the Netherlands has a low percentage of defaults due to the national debt discipline mentality. The Dutch Home Owners' Association explained why there is not so much wrong with the Dutch system. Nevertheless, financial analysts abroad - and in particular those of financial supervisors - are pleased that restrictions were introduced in 2013. The newly announced government measures have been well received in London from a macroeconomic point of view.
Large pension savings on outstanding mortgage debt
At the end of 2016, 664 billion residential mortgages were outstanding in the Netherlands. This makes the Netherlands the fourth largest mortgage market in the EU, after the United Kingdom, Germany, and France. Against this relatively high collective mortgage debt, there is one of the highest pension savings in the world. In 2016, the pension capital amounted to 168 percent of the gross domestic product, the proportionally highest in the world. The Dutch National Statistics Office calculated the pension assets in 2016 at more than 1,700 billion euros, some 2.5 times the outstanding amount of mortgage debt.
In the Netherlands, refinancing a mortgage is more popular than the EU average. Because the mortgages run longer and involve a larger debt, it is worthwhile for Dutch consumers to change their mortgage provider during the term.
Interest rates haven’t reached the bottom
Analysts expect the housing market in the Netherlands to continue to flourish for the time being due to the growing economy and increasing consumer confidence. Rising prices are not yet a problem for consumers: mortgage interest rates in the Netherlands are still historically low. Whereas interest rates have reached the bottom elsewhere in Europe, this does not seem to be the case in the Netherlands yet. Figures from the European Mortgage Federation show that the average interest rate on a new mortgage in the Netherlands last year was 2.59 percent, compared with 1.26 percent in France or 1.16 percent in Finland. The Netherlands is therefore among the top five countries with the highest interest rates in the European Union.
Nevertheless, short fixed-interest periods have lost popularity in the Netherlands since 2006, in favor of mortgages with a fixed-interest period of five years or more.
Healthy and attractive
The Dutch mortgage market is considered by financial analysts to be healthy and attractive. The value of real estate is relatively stable, the debt discipline is one of the highest in Europe, and the risks for lenders are relatively low due, for example, to the
Also, economic factors are favorable. The Netherlands has one of the lowest youth unemployment rates in Europe (the Czech Republic and Germany alone perform better), and the population is expected to grow between 0 and 5% (in the three major cities between 5% and 25%) where countries such as Germany and Spain are shrinking.
To meet demand, the Netherlands would have to build more houses than is currently the case, and further pressure on the housing market is expected. This means that mortgage providers will see their turnover increase, although the Dutch market is highly competitive. And that is good for the consumer again: healthy competition keeps the costs of taking out a mortgage in the Netherlands lower than average.
This article of is subject to a license. Based on . Translated from the Dutch language
by Jos Deuling.
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