Dutch Residential Mortgage Market Update

This commentary provides an updated analysis of the Kingdom of the Netherlands’ mortgage market amid recent macroeconomic trends and their impact on both the owner-occupier and buy-to-let (BTL) segments. The commentary also discusses the implications for the residential mortgage-backed securities (RMBS) market as well as its recent performance.

Summary highlights include:
-- In 2024, house prices should modestly increase after the recovery from the 2023 trough as interest rates stabilise and as major market fundamentals continue to underpin long-term growth.
-- The change in the interest rate environment has contributed to borrowers looking for shorter interest-rate fixation periods, given the high interest rate level and the potential for rate reductions going forward.
-- Buy-to-let mortgages in the Netherlands have faced a tough period primarily due to the increases in interest rates and unfavourable regulatory measures. Despite these challenges, the BTL segment is not expected to experience a significant decline in performance, even if lending volumes have decreased.

“With inflation in the Euro Area returning to levels closer to 2%, market expectations are now centred on how quickly the much-anticipated interest rate cuts materialise during 2024, given the economic slowdown felt in the region. In this regard, long-term mortgage rates already reflect these expectations. This indicates that even if interest rates stay higher for longer than initially expected, we are past the peak, which is positive for house price growth. Simultaneously, the chronic housing supply shortage, historically low unemployment level, and a developed mortgage market should contribute to a modest increase in house prices from current levels during this year”, said André Soutinho, Senior Analyst of European RMBS & Covered Bond Ratings at Morningstar DBRS.