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06 september 2019 Onderzoek Toezichtlabel Working Papers

Using loan level data on mortgage loans originated by Dutch banks during 1996 to 2015, we analyse the determinants of the incidence of non-performance. We find that both the originating loan-to-value ratio (OLTV) and the debt-service-to-income ratio (DSTI) are significantly positively associated with the probability of non-performance. The results suggest that mortgages with government-loan-guarantees perform better. Moreover, several mortgage loan and borrower characteristics, such as the (interest-only) loan type and the underwater status of the borrower, increase credit risk. Our model predictions suggest a novel policy implication: in order to avoid acceleration of non-performance probabilities, the OLTV-limit should be set to about 70%-80% for uninsured mortgages, and to about 90% for those with mortgage insurance.

Keywords: Credit risk, Mortgage loans, Loan to Value, Loan guarantees. 
JEL classification: G20, G21, H81.

Working paper no. 655

655 - Loan to value caps and government-backed mortgage insurance: Loan-level evidence from Dutch residential mortgages



  • Leo de Haan
  • Mauro Mastrogiacomo