The residential mortgage portfolio of life insurers had already expanded by EUR 8 billion in 2013. In 2014, growth continued, albeit at the slower pace of EUR 3.5 billion, which brought the total amount of outstanding mortgages to EUR 44.3 billion at the end of 2014, almost 9% of total assets. As in 2013, the largest increase was seen in the last quarter of the year. In both years this was attributable to balance sheet realignment: securities were sold and the proceeds were used to buy portfolios containing existing mortgages. These portfolios were often taken over from associated parties. Mortgages are an attractive investment, also owing to the trend in interest rates. The return on mortgages is outpacing the falling return on government bonds.
In addition to investing directly in residential mortgages, life insurance companies also invest in bonds issued by domestic and foreign securitisation vehicles. The majority of these investments concerns debt paper covered by mortgages taken over from banks and other parties. Investments in residential mortgages account for about half of total investments in mortgages. In 2014, life insurers bought EUR 0.8 billion of this paper, relating to Dutch residential mortgages. If we include these indirect investments in Dutch residential mortgages, the total residential mortgage portfolio of life insurers adds up to over EUR 48 billion.