Greater mort­gage com­pe­ti­tion in Hol­land will boost lend­ing and af­ford­abil­ity

Financial Mirror (Cyprus) - - FRONT PAGE -

As new play­ers have en­tered the Dutch hous­ing mar­ket, com­pe­ti­tion has in­ten­si­fied re­sult­ing in more lend­ing ac­tiv­ity, a sus­tained hous­ing mar­ket re­cov­ery, Moody’s In­vestors Ser­vice said. Lend­ing shot up by 36.5% over the first nine months of 2015.

“Home pur­chases, as op­posed to mort­gage re­fi­nanc­ings, are the main driver of the in­creased lend­ing vol­ume, and we ex­pect that house prices will rise by up to 5% in 2016, sup­port­ing the hous­ing mar­ket’s re­cov­ery,” said Jeroen Hei­jde­man a Moody’s an­a­lyst and co-au­thor of the re­port.

“Low in­ter­est-rates and in­creased com­pe­ti­tion will con­tinue to re­duce mort­gage rates, ben­e­fit­ing loan af­ford­abil­ity, but over­all CPR rates will stay low and is­suance of Dutch RMBS will stay flat into 2016,” added Hei­jde­man.

Moody’s ob­served that the sus­tained re­cov­ery is broadly driven by house price in­creases in key ur­ban cities and other re­gions. With the ex­cep­tion of Zee­land, house prices grew in all Dutch prov­inces in 2015.

Moody’s says tight un­der­writ­ing cri­te­ria will es­pe­cially af­fect sin­gle-in­come home­own­ers. How­ever, low dou­blein­come home­own­ers seem less af­fected, as the max­i­mum loan-to-in­come (LTI) ra­tio will in­crease to 3.2x in 2016 from 2.9x in 2015.

“Th­ese devel­op­ments are credit pos­i­tive for Dutch RMBS, as ris­ing house pur­chases to­gether with higher home val­ues will re­sult in higher re­cov­er­ies. This will lower the like­li­hood of losses for note­hold­ers,” ex­plained Greg Davies, an As­sis­tant Vice Pres­i­dent at Moody’s.

Well-es­tab­lished mar­ket play­ers are driv­ing the is­suance of Dutch res­i­den­tial mort­gage-backed se­cu­ri­ties, and the rat­ing agency expects that th­ese is­suers will con­tinue to rely on a di­verse fund­ing base which will re­sult in a sim­i­lar RMBS is­suance in 2016 rel­a­tive to 2015.

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