Statistical News Release: Further easing of credit standards and terms and conditions for bank-based housing loans

Statistical news
Datum 31 januari 2019

The Dutch banks eased their credit standards and terms and conditions for housing loans again in the fourth quarter of 2018, continuing the trend that started in early 2017. This means that, while the demand for housing loans is increasing, banks say mortgage lending growth is also supported by an increase in the supply of housing loans. Actual mortgage lending figures depend on both the demand and supply of housing loans.

This can be seen from the results of the three-monthly Bank Lending Survey (BLS). In the BLS, the Dutch-based banks express their views on the development of demand for housing loans, credit standards and terms and conditions for loans. The outcomes are expressed in net weighted percentages: the weighted sum of the number of banks that reported an increase/tightening minus the weighted sum of the number of banks that reported a decline/easing.

According to the banks, the demand for housing loans held up well in the last quarter of 2018. On balance, 52% of Dutch banks reported an increase in demand for housing loans. This is slightly lower than in 2015 and 2016, when percentages between 60% and 100% were the standard.

Most banks mentioned the favourable housing market prospects, consumer confidence and general interest rate levels as the three main factors that contributed to the increased demand for housing loans by households. According to some 30% of the banks, the housing market regulations and tax regime have also had a positive effect on housing loan demand since 2017. Remarkably, most banks indicated that alternative sources of funding - such as loans from other banks or non-banks have not had an impact on bank-based mortgage lending in the past few years. The same applies to savings-based funding. Both these factors are often mentioned as a possible explanation for the moderate growth in actual bank-based mortgage lending in the Netherlands in the past few years.

Many banks cite increased competition as an important reason for easing the credit standards and terms and conditions for mortgage lending. Starting in 2017, the Dutch banks have reported eased credit standards on a quarterly basis. As many as 50% of the banks on balance did so in the third quarter of 2017 and the first two quarters of 2018. Terms and conditions started to ease even before 2017, particularly with respect to the margin on loans with an average risk profile (shown in Figure 1). In the last quarter of 2018, some 32% of banks indicated they had narrowed their margins. In addition to tightened competitive conditions, the banks also cite a decreased risk perception as the main reason for easing their credit standards and terms and conditions.

The BLS results reflect the actual growth figures of bank-based mortgage lending. The trend of positive year-on-year growth, which started in January 2017, continued in 2018 with year-on-year growth of around 0.5%. This means mortgage lending growth seems to pick up, albeit at a moderate pace. This also appears from low month-on-month growth figures, which moved between -0.1% and +0.1% in 2018. These growth figures are in sharp contrast with the high growth percentages observed before 2012.

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