Banks are the biggest players in the Dutch mortgage market. At the end of 2022, they accounted for €550 billion in outstanding mortgage loans, or 69% of the total volume.
Bank mortgage lending increased sharply from the 1990s until the credit crisis. Besides strong income growth, some structural factors also contributed to the increase in lending during this period, such as:
- Increase in the number of households
- Increase in the number of dual earners
- Easing in credit underwriting standards
- Mortgage products that carry no or a limited repayment obligation before maturity
Leaving aside the COVID-19 period, growth in bank mortgage lending has been weak since the credit crisis. Factors that have dragged growth include restrictions on tax-deductibility for new interest-only mortgage loans and the fact that capital repayment has generally become more popular among households.
Another cause of the limited growth in bank mortgage lending is the fact that institutional investors – pension funds, insurers and investment funds – have been gaining market share for several years. Whereas banks were responsible for the growth in Dutch mortgage debt seen in the past few decades, most of the growth seen since 2014 is accounted for by institutional investors. They account for 87% of the total increase in outstanding mortgage loans to Dutch households over the period from 2014 to mid-2022. At the end of 2022, institutional investors had €160 billion in mortgage loans on their balance sheets (17% of GDP), making them the second largest mortgage lenders after banks.
Other financial institutions
By contrast, other financial institutions (OFIs), which largely consist of finance companies and securitisation vehicles, have seen a downward trend. The decline is related to banks securitising fewer residential mortgage loans on the one hand, and stricter accounting rules on the other, which increasingly require banks to leave securitised residential mortgage loans on their own balance sheets. As a result, they are not counted under OFIs. Higher investment in residential mortgage loans by institutional investors also contributed somewhat as they securitise fewer mortgage loans. At the end of 2022, this left more than €87 billion in residential mortgage loans on OFIs' balance sheets, representing a decrease of almost 60% from 2010.