Dutch financial regulator AFM is planning to propose new rules that may curb mortgage lending in the Netherlands in a bid to protect homebuyers as the economy slumps and unemployment rises.
The ratio between mortgage loans and house value is ’still high,’ Hans Hoogervorst, head of AFM and a former finance minister, said in Tel Aviv on Tuesday. ‘Obviously, we’ll try to do something about it.’
He said other countries’ regulators found it ‘extraordinary’ that loans exceeding the property’s value are common in the Netherlands.
The Netherlands, the fifth-largest economy in the euro area, has the highest level of mortgage debt compared with gross domestic product in the 16-nation region, according to 2007 data of the European Mortgage Federation.
House prices in the Netherlands fell 3.1 per cent in the first three months of the year, dropping for a third quarter as sales almost ground to a halt, Dutch realtors association NVM said in April.
Mr Hoogervorst, who will present an outline of the proposal by the end of August, declined to give further details. ‘This cannot be a hard landing, given the economic situation,’ he said at the International Organization of Securities Commissions conference, adding there is need for a ‘transition period’ before new rules become effective.
Dutch lenders have agreed to limit most mortgage offers to about 4.5 times buyers’ annual salary. A survey by the foundation of registered mortgage advisers showed that more than half of them offer homebuyers a bigger loan, news agency ANP reported, citing the survey’s results.
Dutch homebuyers can still borrow more than the property’s value to pay for transaction costs, taxes or renovations.
The Dutch economy may contract more than 5.2 per cent this year, Finance Minister Wouter Bos said last month. Unemployment in the Netherlands, still the lowest in the bloc, is set to rise to 8.75 per cent next year from 5.5 per cent this year, according to government forecasts.
Source: Business Times, 10 Jun 2009
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