Dutch housing market recovery gained pace this year:
The housing market has recovered strongly since the trough was reached in June 2013. Prices are now rising by more than 3% yoy, while transactions have increased by 22% so far this year. Currently, some 15,000 homes change owner every month. The recovery has been broad-based across regions as well as type of home.
Mortgage origination: shift towards longer maturities and more classical mortgages
Mortgage origination has picked up as well, with new production currently outpacing redemptions. Households also prefer to fix mortgage interest rates for longer, while amortising mortgages have also become the norm.
Dutch mortgages less risky than often perceived
Loan-level-data of the Dutch Central Bank have showed that Dutch mortgages are less risky than often thought. Combining loan-to-value and loan-to-income data reveals that only a small portion of Dutch mortgages have high LTVs as well as high LTIs. Furthermore, full interest-only mortgages tend to be concentrated at older households and at low LTVs. Low mortgage loan losses underline the strong quality of Dutch mortgages.
Traditional mortgage lenders losing market share to new entrants
Mortgage funding seems in a transitory phase, as traditional mortgages lenders are losing ground. Insures and pension funds have gained market share on the Dutch mortgage market. This mainly reflects regulatory changes, which have left banks at a disadvantage. Therefore, this trend is likely to continue.
Conditional pass-through vs RMBS vs full pass-through
Dutch mortgages are partly financed on the capital market by issuance of RMBS and covered bonds. RMBS covers the largest part, but the funding mix seems to be shifting towards covered bonds, These benefit from a more favourable regulatory treatment, while the conditional pass-through structure also narrows the difference in credit enhancement. Soon, full pass-through structure will also see the light of day. RMBS will still remain an important funding source, which could be boosted by new issuance of insurers that gain market share.
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