European mortgage markets: what can we learn? - Hypsotech ...

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Classification of Dutch mortgage market based on repayment methods:
Interest and principal Saving to repay at maturity Interest payments only:
repayment mortgages: date:
Savings mortgages
Annuity mortgages
Life insurance mortgages
Interest-only mortgages
Investment mortgages or bullet mortgages
Linear redemption
mortgages Hybrid savings and
investment mortgages
Figure 3: The mortgage products available in the Netherlands based on repayment typology.
In the general overview of the Dutch market it is noted that there are two main factors influencing
the height of the loans, i.e. the tax deductibility of the mortgage interest and the
house prices. The foreclosure value is related to the house prices but also to the specific condition
of the collateral: for newly built houses the foreclosure value is 90% of the market
value and for existing houses it generally is 80 to 85%. In the Netherlands the LTV 4 can run
up to 125-135%, which is relatively high in comparison to most countries. Some of the reasons
for the increase of the LTV in the last decade, are the earlier mentioned tax deductibility
of interests paid over mortgage loans, and the NHG that yields lower credit risk for lenders.
Also the specific characteristics of the background of the borrower play a major role in
determining the individual LTV: the job security and the fixed expenses are important 5 as is
the delinquency registration at the Dutch credit bureau (BKR). Also, the income-to-debt
ratio plays a role in determining the LTV. Nevertheless, the personal health situation plays a
less important role. Below in figure 4 an overview is given:
Figure 4: model of the variables
having a major influence on the
LTV in the Netherlands.
4 The LTV in the Netherlands is actually detemined on basis of the foreclosure value, thus the abbrieviation
LTfV would here be more suitable. For means of consistency the term LTV is used for all markets.
5 Source: Dutch mortgage intermediary De Hypothekers Associatie BV, AKA De Hypotheker