The Dutch Mortgage Market
Dutch Banking Association
Download Document| Date Published | 2015 |
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| Country | Netherlands |
Abstract
On average, Dutch mortgages have high Loan-to-Value and Loan-to-Income ratios. Figure 1 and Figure 2 show that LTV and DTI (Debt-to-Income) ratios (both at origination) in the Dutch market are amongst the highest in Europe. These values are usually seen as indicators of high-risk mortgage market. Yet at the same time, Dutch mortgages have a good track record in terms of performance. According to Fitch(2013), default rates in the Dutch mortgage market are low compared to other countries. The Netherlands scores amongst the best markets. The number of foreclosures is equally low. Although losses have increased over the past years, and may increase further, the actual loss rate (0.08 percent in 2013) is still very low. The existence of high LTV and LTI ratios on the one hand, and low defaults and losses on the other hand, leads to a paradoxical situation. Referring to this paradox, the Dutch Central Bank recently called the Dutch mortgage market 'a market with a Janus head'. This paradox is the reason for the Dutch Banking Association to compile this memorandum. In line with the position and the responsibilities of the NVB, the focus of the memorandum lies on industry level, i.e., banks and other mortgage lenders. Where applicable, macroeconomic implications are taken into account. The memorandum presents an overview of the Dutch mortgage market: the housing market, the size of the market and outcomes in terms of defaults, foreclosures and losses, mortgage market risks, and risk mitigating factors embedded in the Dutch institutions,such as tax regime, the legal framework for mortgages and the social security system. Chapter 6 describes some recent reforms in Dutch legislation concerning the housing and the mortgage market. The memorandum finishes with a conclusion and a list of references.