Dutch Residential Mortgage Market Update

This commentary provides an updated analysis of the Kingdom of the Netherlands’ mortgage market amid recent macroeconomic trends, such as inflation and rising interest rates, and their impacts on both the owner-occupier and buy-to-let segments. Moreover, the commentary also discusses the implications for the residential mortgage-backed securities (RMBS) market as well as its recent performance.

Summary highlights include:
-- Data from the end of 2022 onwards already points to a slowdown in house price increases and even a decrease on a quarterly basis. DBRS Morningstar expects this trend to continue during 2023.
-- Despite a rapid increase in mortgage rates, Dutch borrowers face only limited affordability deterioration given the majority of relatively long reset periods on fixed-rate mortgages.
-- DBRS Morningstar believes that, due to inherent structural protections in the RMBS transactions, the expected house price correction and moderate arrears deterioration will not affect the stability of Dutch RMBS ratings in 2023.

“The Netherlands has experienced one of the largest house price increases in Europe since the onset of the pandemic. A strong economy, housing supply-demand imbalances, and record-low mortgage rates have fuelled this growth, stretching mortgage affordability. DBRS Morningstar expects Dutch house prices to correct in 2023 due to a combination of factors, including inflation, rising mortgage rates, and the general economic situation. Although DBRS Morningstar anticipates that mortgage delinquencies will see some increase, it will not worsen significantly, however, as existing borrowers are protected from immediate rate rises due to the relatively long-term fixed-rate nature of Dutch mortgages”, said André Soutinho, Senior Analyst of European RMBS at DBRS Morningstar.