According to Utrecht University, Dutch mortgage deeds have been recently called one of the most unintelligible documents to read in the Dutch language. Sure, it’s full of jargon and legal terms, but it is also contains too much information per sentence, sentences that are too long in any case, unnecessary auxiliary verbs and one of my pet peeves, too many passive sentences. Even campaign flyers and research articles are written more succinctly than mortgage documents, a conclusion linguists reached after analysing the written materials of 42 mortgage deeds from 21 agents.
And even after simplifying the 42 deeds, only 69 percent of respondents said they understood the newer version, as compared to 57 who understood the old versions.
Besides barely understanding what you’re signing up for even for native Dutch speakers, many articles will tell you that the Dutch have the highest household-debt levels in the euro zone, which is all due to mortgages costing more than the value of people’s homes. Amsterdam being the place to be for many people, it is currently on a real estate bubble list, moving from ‘overvalued’ in 2015 and 2016 to ‘bubble risk’ in 2017.
Tags: Amsterdam, language, mortgages
The Economist has been keeping track of the development of house prices for a while now and this recent graph neatly shows the house price bubble the world is slowly getting out of.
What may surprise you to know is that the Netherlands, typically known as an economically stable country, is one of the worst offenders when it comes to driving up prices to insanity level 11. What is worse, is that unlike most of the world’s nations, the country will see only little decrease of house prices in the near future.
Hendrik Oude Nijhuis looks even further back than The Economist in an article for Z24. He points out that in the past 400 years, house prices in the Netherlands have always followed inflation. Sometimes they rose more quickly than inflation would dictate and sometimes they would lag behind inflation, but they would always go back to a happy medium. Houses in the Netherlands are now 75% more expensive than the historic average, which is a record.
House prices have been decreasing slowly since 2008, but as you can see in the first chart, the process is slow. One giant brake on the current housing market is that the current generation of first-time homeowners is in a bad fix. On the one hand, these young house owners got in when the prices soared, meaning they bought expensive houses, and on the other, they took out mortgage loans that they are not paying off. The result is what Oude Nijhuis calls ‘submarine mortgages’, loans where the collateral is worth way less than the amount owed. This generation (Oude Nijhuis says there are 1.7 million of these submarine loans against 4.3 million privately owned houses) is unable to move on even if it wanted to. Home owners cannot afford new houses and yet if they buy one, they will take a loss on the old one.
Add to this toxic mix the fact that politicians don’t want to be seen touching interest deductions and you have the recipe for an unhealthy housing market for years to come.
Tags: bankers, banks, house owners, housing, money, mortgage, mortgages, politics, submarine mortgages, wedge issues
ABN Amro’s mortgage portfolio has decreased by 0.3 billion euro because house owners have been making extra payments using their holiday bonuses, the troubled bank writes in its interim financial report for 2013 (PDF, page 41).
Z24 discovered this titbit and adds that according to TNS Nipo (a polling company) 1 in 5 home owners would like to make extra mortgage payments. Dutch banks generally penalize extra payments above a threshold of 10% to 15% of the loan.
Dutch employees have a right to a holiday bonus of 8% of their annual salary. Employers usually pay this bonus in May before the summer holidays start.
House prices in the Netherlands have been declining for a couple of years now, resulting in a negative balance: home owners, especially young ones, owe the bank more money than their home is worth. Z24 says that home owners use their holiday bonuses to help pay off their mortgages partially because the interest on savings accounts is at a very low point. These extra payments are not enough, the financial news site says, to counter the declining house prices.
Tags: holidays, housing, money, mortgages
Debt to income ratio (%) for households in 2010. Source data: Eurostat.
Last week the Wall Street Journal published an excellent article by Matthew Dalton titled Mortgage Burden Looms Over Dutch. Us Dutch have an average debt of 2.5 times our yearly income, which makes us the heaviest lenders of Europe.
We got into this position because of the way we structure our mortgages. We borrow heavily, then let that debt stand for decades. Interest is deductible from our income tax.
Asked of Prime Minister Mark Rutte (VVD party) whether this is a problem he told Wall Street Journal:
“It’s not a big issue…if you look at the whole picture,” he said, noting that the Dutch have saved as much in their pension funds as they have in mortgage debt—”and we have huge private savings.”
Financial news website Z24 sorta-kinda calls Rutte out on that. “Staat genoteerd”, (duly noted) writes Jeroen de Boer, i.e. “whatever“. What the Wall Street Journal doesn’t know, and what somebody who is such a great fan of “the whole picture” should have told them, is that mortgage interest deductions are one of the core political wedge issues in the Netherlands. Both Rutte’s party VVD and their coalition partner CDA have told their constituencies time and again that they will never abandon the tax deduction.
Tags: economic crisis, finance, housing, Mark Rutte, mortgages, politics
Dutch television news show EenVandaag gave me a new reason to be scared to ever buy a house in the Netherlands. Since 10 February 2010 Dutch banks have decided not to approve any mortgages to people buying a house built on ground owned by a private person. This means that some 125,000 home owners are now stuck in their homes forever, unless they leave it empty and move, or rent it.
Homes in the Netherlands are often built on ground that is leased from someone else, usually a local government or a housing corporation, a very common practice in big cities like Amsterdam. In fact, real estate agents in Amsterdam, where most homes are built on leased ground albeit owned by the city, are now refusing to sell any houses built on ground owned by private persons.
Why would banks pull this? Acccording to De Telegraaf, the regulatory body of Dutch banks has a duty to assess the risk of the loan, and find it too difficult when the ground is privately owned. The legislation on ground leasing is said to be “complete chaos” and deals with “forced contracts” (I like the Dutch ‘wurgcontract’, which literally means ‘strangulatory contract’). These private ground owners are basically mimicking the government who also ask for “mafia-like amounts” when ground leasing. Fighting the government for unfair practices is one thing, but you can’t do that with a private person who can apparently do what they want.
(Links: ad, telegraaf)
Tags: banks, ground leasing, homes, housing, mortgages