Bond financing less popular among mortgage lenders

In 2022, the amount outstanding in Dutch securitisations of residential mortgages held by investors went down by €5.3 billion (-17%) to €25.9 billion. In relative terms, this decline was almost twice the average since 2010.

This downward trend is partly linked to the use of other types of funding, which has enabled banks to obtain money more easily and more cheaply in recent years, for example via the ECB’s additional lending facilities and the issuance of covered bonds.

The lower share of banks in new mortgage lending was another contributing factor. Pension funds and insurers have substantially increased their investments in residential mortgages since 2014 –through investment funds or otherwise – and have invested less in securitisations. Mortgage loans have become more attractive to institutional investors, partly because the long maturities of new mortgages are well suited to the long-term nature of their commitments.

Nevertheless, new external securitisations of residential mortgages worth €3.1 billion were issued in 2022 (€5.9 billion in 2021), mainly by non-bank mortgage lenders. This was not enough to offset the effect of matured existing securitisations and to reverse the downward trend, however.

More covered bonds

The outstanding amount of covered bonds issued by Dutch banks remained almost unchanged in 2022 (€88.3 billion), although new issuances totalled €11.4 billion (2021: €8.2 billion).Since 2015, the outstanding volume of covered bonds has exceeded that of securitisations. This may be due to a number of factors, including the lower financing cost of covered bonds, the lower costs of setting up and managing a covered bond programme and the requirements imposed on securitisations because of their more complex nature.

Although covered bonds have become more popular as a financing instrument in the Netherlands in recent years, they have not fully offset the decline in securitisations. The total amount outstanding declined by €5.3 billion (-4.4%) to €114.2 billion in 2022.

This was 14% of the total outstanding residential mortgage loans provided by Dutch financial institutions (€799 billion) in 2022, compared to 21% in 2013. The share of total residential mortgages issued that is funded by the bond market through securitisations and covered bonds has thus fallen by a third from its peak in 2013.