Relaxing mortgage lending standards drives debt and house price growth
De Nederlandsche Bank (DNB) and AFM's first joint monitor warns that relaxing mortgage lending standards would increase household debt and further inflate house prices. The report highlights persistent financial stability risks from high mortgage debt and rising LTV/LTI ratios for new loans.
Dutch housing market shows signs of overheating
The Dutch housing market remains tight and shows signs of overvaluation.
House prices have risen by 21 percent since mid-2023, significantly outpacing income growth of 14 percent in the same period.
This has pushed the price-to-income ratio up by almost 9 percent.
In 2025, nearly 75 percent of housing transactions involved bids above the asking price.
Mortgage debt continues to be high, growing by over 5 percent in Q2 2025, the largest increase since 2008.
The total mortgage debt-to-GDP ratio has hovered just under 80 percent for the past two years, remaining high compared to the eurozone average of 50 percent.
While average LTV for all outstanding mortgages is just over 50 percent, new loans, especially for first-time buyers, show increasing LTV and LTI ratios since 2022.
Lending standards under scrutiny
Statutory lending standards, in place since 2013, initially reduced household vulnerabilities by lowering average LTV and LTI ratios.
However, a reversal has been observed since 2022, with new loans showing increased LTV and LTI ratios.
Over half of first-time buyers now secure mortgages with Loan-to-Value (LTV) ratios exceeding 90 percent, and their average LTV reached 89 percent in 2025.
Households are also increasingly utilizing their maximum borrowing capacity, with first-time buyers leveraging 92 percent and movers 83 percent of their income-based limits.
This trend heightens the risk of problematic mortgage burdens following income shocks.
Refinancing risks are limited short-term, but 30 percent of mortgages will face interest review by 2030.
Nearly 40 percent of outstanding mortgages are interest-only.
Prudence is paramount
Prudent lending standards remain essential for financial stability in the Netherlands.
Relaxing these norms would, given the tight housing market, lead to more risky lending behavior and further upward price pressure.
A broader policy mix, including reducing fiscal incentives and increasing housing supply, is therefore necessary to mitigate structural vulnerabilities.