Greater mortgage competition in Holland will boost lending and affordability

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.