Substantial increase in voluntary mortgage repayments
Dutch households made voluntary mortgage repayments worth EUR 11 billion in 2013 and EUR 18 billion in 2014, a substantial increase compared with previous years. This can be primarily explained by the low interest rate on savings deposits, which makes repayments more profitable than savings. Most voluntary mortgage repayments were made by older households, who used part of their savings to make voluntary repayments on their – relatively low – mortgages. Households with relatively high mortgage rates also made more voluntary repayments.
However, these repayments have only had a limited effect on reducing the number of underwater mortgages, as it is mostly the younger households who are facing the underwater problem. Of all voluntary repayments, a total of EUR 6 billion was made on underwater mortgages. Only in 11% of all cases did the voluntary repayments result in the underwater mortgage "resurfacing" again. However, the average underwater debt has decreased from 20% to 16% of the house value since the beginning of 2013.
Although the available data does not show which of these repayments were made using gifts, the temporary extension of the tax exemption for gifts meant for home purchases and mortgage repayments does seem to have played a role in this. During the period in which the maximum limit for tax-free donations for house purchases was extended from EUR 52,000 to EUR 100,000, the volume of repayments exceeding EUR 52,000 increased. These repayments accounted for over 60% of all voluntary mortgage repayments.
Chart 1: number of underwater mortgages
In thousands, on a quarterly basis