NMa: Dutch mortgage margins high

The margins on Dutch mortgages have been relatively high since mid 2009, both by historical standards and in comparison with neighbouring countries. The higher margins are charged for both variable-interest mortgages and for mortgages with longer fixed-rate periods. These are the conclusions of the Mortgage Rate Quick Scan, a preliminary inquiry published by the Netherlands Competition Authority (NMa) on 1 November 2010.. 'High margins may point to a lack of competition. There may also be other explanations. That is why I think it is important that the NMa continues this inquiry, particularly in light of public concerns about mortgages rates. A lack of competition may lead to unnecessarily high rates', according to Pieter Kalbfleisch, chairman of the NMa Board.

Banks use various sources to fund mortgages, such as savings deposits and loans on the capital markets. In its preliminary inquiry the NMa took account of various increases in funding costs. These occurred, for instance, because of changes in risk premiums and the reliance on more expensive funding sources such as savings. Depending on the cost calculation method used, the margins for the most common mortgage forms have increased by 0.3-1 percentage point since July 2009.

Around 3.5 million households in the Netherlands, out of a total of nearly 4 million owner-occupied homes, have a mortgage. The total national mortgage debt stands at around EUR 590 billion.

The preliminary inquiry is part of a broader sector study of the level of competition on the mortgage market. The results of the more extensive follow-up sector study are expected to be published in the spring of 2011. This study is conducted by the Financial Sector Monitor, an NMa team which studies the financial sector from the perspective of competition.

The NMa invites the banks and other stakeholders to respond to the findings of the preliminary inquiry. Reactions can be emailed to acm-post [at] acm [punt] nl (acm-post[at]acm[dot]nl).