Competition in the Dutch mortgage market: notes on concentration, entry, funding, and margins

This article describes the institutions that shape the Dutch mortgage market, as well as how they affect mortgage funding, and, ultimately, mortgage interest rates. The Dutch housing market is characterized by a very large social housing sector, as well as a relatively large share of owner-occupied housing. The private rental sector is underdeveloped. As a result, Dutch residents buy their first house at a relatively young age, with low personal savings and a mortgage loan that has a high loan-to-value ratio. Banks in The Netherlands rely heavily on international capital markets for funding, and the financial crisis has had a strong impact on funding costs. In our view, the increase in funding costs is the main cause of the increase in mortgage interest rates and the exit of several foreign lenders after the start of the financial crisis. We also discuss the investigation into mortgage interest rates that was carried out by the Netherlands Competition Authority.