The Dutch mortgage market from a Nordic perspective

In this paper we analyse the mortgage markets in the Netherlands and the Nordic countries. We provide a broad overview and cover a wide range of topics, such as market size, house price developments, yield levels, funding, loan characteristics, risk and capital requirements.

 

The Netherlands, Denmark and Sweden all have large and mature mortgage markets, supported by well-developed economies and borrowers with a high average net wealth. Mortgage spreads are currently attractive and the risk profile of mortgages in the Netherlands and the Nordic countries is low. Dutch mortgage loans, with their long fixed-interest terms, are also suitable for the interest-rate matching portfolio of institutional investors with long-term liabilities. The NHG guarantee by the Dutch central government can offer additional protection. Some Nordic countries also offer state guarantees, for example for social housing loans, but not with the same accessibility and coverage.

 

Total outstanding residential mortgage loans

 

Total outstanding residential mortgage loans

 

Total outstanding residential mortgage loans (selected EU countries plus the United Kingdom and Norway). The total size of the residential mortgage market in the EU, the United Kingdom and Norway was €8.9tn in 2022. Source: European Mortgage Federation, Hypostat (2023), as of December 31, 2022.

 

The table below summarizes the key characteristics for investors in these markets.

 

Main characteristics mortgage markets

 

Main characteristics mortgage markets

 

Overview of the main characteristics of different mortgage markets. (+) and (-) indicate an relatively high and low score; (+/-) indicates a neutral assessment. Source: Aegon Asset Management, as of November 15, 2023.

 

The relevance of each criterion will depend on an institutional investor's return objective, risk tolerance, liabilities, illiquidity budget and other constraints. This table therefore only serves as an aid to make a choice between the different countries based on your own preferences. But given this information, and from the perspective of an institutional investor with long-term liabilities, we can conclude the following:

 

  • The Netherlands, Denmark and Sweden all have large and mature mortgage markets, supported by well-developed economies and mortgage lenders with a high average net worth. The Finnish market shares some of these characteristics, but is much smaller in size.
  • Mortgage spreads are currently attractive and the risk profile for mortgages in the Netherlands, Denmark, Sweden and Finland is low.
  • Dutch mortgage loans, with their longer fixed-interest terms, fit well into the interest-rate matching portfolio of institutional investors with long-term liabilities.
  • Danish mortgages also generally offer longer fixed-rate maturities. However, Danish mortgage bonds provide a less effective interest rate hedge due to their callable nature that allows early repayment without penalty.
  • For Sweden and Finland, the match with long-term liabilities is also less effective, with mainly variable or short-term fixed mortgage rates.
  • The NHG guarantee by the Dutch central government can offer additional protection. Some Nordic countries also offer state guarantees, for example for social housing loans, but not with the same accessibility and coverage.

 

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The Dutch mortgage market from a Nordic perspective
The Dutch mortgage market from a Nordic perspective
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