Fewer Dutch “mort­gage pris­on­ers” ow­ing to house price rises and low in­ter­est rates

Financial Mirror (Cyprus) - - FRONT PAGE -

Fewer Dutch mort­gage bor­row­ers will be in neg­a­tive equity as ris­ing house prices lower loan-to-value (LTV) ra­tios, ac­cord­ing to Moody’s In­vestors Ser­vice, adding that low in­ter­est rates will boost ex­ist­ing bor­row­ers’ af­ford­abil­ity and mo­ti­vate first-time buy­ers.

“Ris­ing house prices, low in­ter­est rates and the solid econ­omy will un­der­pin the re­duc­tion in mort­gage pris­on­ers. Loan af­ford­abil­ity will also im­prove in 2016, keep­ing ar­rears and losses low in the deals we rate,” said Jeroen Hei­jde­man, a Moody’s an­a­lyst.

“The num­ber of bor­row­ers who are trapped in their mort­gages is none­the­less dis­parate across the country. Prov­inces like Flevoland and No­ord-Bra­bant have more than twice the pro­por­tion of mort­gage pris­on­ers com­pared with Lim­burg, Zee­land and Gronin­gen. While th­ese bor­row­ers do have op­tions to re­solve their debt bur­dens, they are limited and strict cri­te­ria ap­ply”, said Greg Davies, an As­sis­tant Vice Pres­i­dent at the rat­ing agency.

The Moody’s anal­y­sis shows the pro­por­tion of bor­row­ers with a high in­dexed LTV (above 102%) is set to fall to 24% in 2016 from 33% in 2015, based on an an­tic­i­pated house price rise of up to 5%. Those in the most dif­fi­culty are bor­row­ers with a high in­dexed LTV ra­tio and full in­ter­est-only mort­gages, or those with high LTV ra­tios and in­suf­fi­cient in­come to re­fi­nance their mort­gages.

Moody’s de­fines “mort­gage pris­on­ers” as bor­row­ers with loans in Dutch res­i­den­tial mort­gage-backed se­cu­ri­ties that are un­able to re­fi­nance on to a lower mort­gage in­ter­est pay­ment rate, or change their mort­gage provider be­cause they ei­ther have: (1) a LTV ra­tio above 102% and a full in­ter­est-only mort­gage loan,

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