Advice: maximum mortgage down further – Financieele Dagblad (Registration)

Homes Loans in the Netherlands should be reduced further. A mortgage should be only a maximum of 90% of the house price in 2028.

This allows the Financial Stabiliteitscomité (FSC) in a advice to the government. According to the committee, the successive governments have to reduce the maximum loan step by step until the so-called Loan-to-Value (LTV) comes out at 90%.

This means that more and more home buyers will have to bring their own money when buying a home. Now the maximum mortgage in the Netherlands 103% of the purchase price.

Underwater

The retrenchment is necessary because the mortgage debt in the Netherlands are exceptionally high, according to the FSC. The high housing loans, the balance sheets of banks and households are vulnerable, and there are greater fluctuations place in housing prices and in the real economy.

The Committee points to the large number of households in the Netherlands that his mortgage is under water. The house price is lower than the mortgage loan, which means that households on a sale now would be left with a residual debt.

The effects of a further reduction in housing loan according to report by DNB:

• A lower LTV limit increases shock resistance, in particular first-time buyers

• A lower LTV limit reduces the risk of extreme fluctuations in the Dutch economy, with periods of strong growth alternated with periods of sharp contraction (‘boom-bust’ cycle).

• Lower LTV ratios limit the credit risk of banks and reduce the dependence on bank financing market.

• A lower LTV ratio contributes to limiting the type of economic fluctuations that the Dutch economy has suffered in recent decades.

• A reduction in the LTV limit will lead to less demand for owner-occupied homes.

• Most of the constrained start buying after a few years is expected to still a home.

• The extra demand for rental housing is during the dismantling of the LTV limit 11,000 to 19,000 homes each year.

• The demand for owner-occupied homes at a LTV-limit of 90% is reduced by a maximum of about 190,000 (about 2.5% of the total number of households).

• The mortgage debt is long term almost 6% lower

• The average house comes after 5 years 3.5 to 4% and in the long term 4 to 5% lower than if policy remains unchanged.

• Long term returns the real economy back to the baseline and 9, the effects on GDP volume, private consumption, investment and unemployment zero.

Read the full report

An LTV limit of 90% would be for the Netherlands significant mean reduction but internationally, this ratio is still high, writes the committee. A reduction to 80% (such as the IMF and the Commission advocate Wijffels) FSC, however, does not sit. This would mean that many Dutch people will not be able to buy a home. Especially start-ups must save more for them to purchase their first home.

Office

The FSC is a new advisory body that aims to protect the government for financial risks. The committee includes representatives of the Dutch Central Bank (DNB), the Financial Markets Authority (AFM) and the Ministry of Finance.

or the maximum loan will actually fall to that level is still uncertain. The government wants to reduce the maximum already in increments up to 100% in 2018. The VVD has already indicated to be not in favor of further reduction.

Lower house price

In a separate message to the Dutch Central Bank examines the effects of a lower maximum loan. Starters suffer the most damage, but according to DNB, they can save on average nearly three years, almost all of them still end up buying a home.

A progressive reduction of the LTV limit will housing prices in five years, up to 4% lower than under unchanged policies. As starters in the following years with enough savings to go on the market, the housing prices will recover.

Rentals

If the measure takes place, then there will be more demand for rental housing. According to the committee puts the current cabinet proper steps to create more houses for rent in the private sector, but the rate of increase in the supply of rental housing, it is probably too low to meet the extra demand.

why additional measures are needed, such as the liberalization of rental properties and ease of tenancy law.