Statistical News Release: Smaller banks are gaining market share in Netherlands bank mortgage market

Statistical news
Datum 31 juli 2019

In the Netherlands, banks continue to dominate the market for mortgage loans. The Dutch banking sector has traditionally been concentrated, dominated by a few market players, and the bank mortgage market is no exception. The past few years have seen smaller banks gain market share, however, with the concentration rate easing somewhat.

Three-quarters of the Dutch mortgage debt is in the hands of banks

At 31 March 2019, the total mortgage debt of Dutch households stood at EUR 715 billion, edging up 1% from a year earlier. While non-banking operators, such as insurers and investment funds have stepped up their activities in the Dutch mortgage lending market, the various players have seen their market shares roughly stabilise over the past few years. Today the banking sector still carries the vast majority of mortgage loans in its balance sheet. If the loans which banks have moved to special-purpose vehicles in the form of securitisations are added to those shown in their own balance sheets, around three-quarters of the total Dutch mortgage debt, or EUR 527 billion, is in the hands of the banking sector.

In the Dutch banking sector, mortgage loans have traditionally been extended by a relatively small number of banks. That said, concentration in mortgage lending is not always stable (see Chart 1, left-hand scale).

Smaller banks gain market share, offering lower interest rates

Over the past years, smaller banks, with total assets up to EUR 50 billion, have gained market share, at the expense of larger banks, with total assets in excess of EUR 50 billion (see Chart 1, right-hand scale). Many causes could potentially underlie this trend. One could be the narrowed interest rate differential between large banks and other banks. In the past, major banks offered their mortgage loans at a lower average interest rate than smaller banks, conceivably because they had a relatively large pool of savings and could access capital market funding, which was typically cheaper than household savings. Smaller banks, by contrast, could only tap savings. These were less abundant and more expensive, which was reflected in their mortgage interest rates. Since 2014, however, differences between large banks and the smaller banks in terms of mortgage interest rates have all but evaporated (see Chart 2). In fact, average rates offered by the smaller banks are currently around six basis points below those of the large banks. Adjusted for changes in fixed-interest periods – given that short periods always carry lower interest rates – the difference is even more marked, at almost 20 basis points.

The smaller banks that saw their market shares expand are incumbents that chose to significantly grow their mortgage lending portfolio. Some are banks in a group that also comprises an insurance firm, with the decision to boost mortgage lending resulting in larger lending volumes in the group's banking balance sheet.

Outliers seen in the past few years

The blue line in Chart 1 shows that the concentration rate also went up during the financial crisis. The peak shown in 2010 has an obvious cause. As ABN AMRO Bank acquired Fortis Bank in the third quarter, it consolidated the latter's mortgage loan portfolio into its own. A number of minor fluctuations in the concentration rate can also be seen between 2010 and 2014, such as in 2010, when BLG Hypotheekbank and SNS Bank merged in the fourth quarter, and in 2012, when Rabobank acquired Friesland Bank in the second quarter.