Loan to Value Caps and Government-Backed Mortgage Insurance: Loan-Level Evidence from Dutch Residential Mortgages

Leo de Haan, Mauro Mastrogiacomo*

*Corresponding author for this work

Research output: Contribution to JournalArticleAcademicpeer-review


Using loan level data on mortgage loans originated by Dutch banks during 1996 to 2015, we analyse the determinants of the incidence of non-performance. We find that both the originating loan-to-value ratio (OLTV) and the debt-service-to-income ratio are significantly positively associated with the probability of non-performance. The results suggest that mortgages with government-loan-guarantees perform better. Moreover, several mortgage loan and borrower characteristics, such as the (interest-only) loan type and the underwater status of the borrower, increase credit risk. Our model predictions suggest a novel policy implication: in order to avoid acceleration of non-performance probabilities, the OLTV-limit should be set to about 70–80% for uninsured mortgages, and to about 90% for those with mortgage insurance.

Original languageEnglish
Pages (from-to)453-473
Number of pages21
JournalEconomist (Netherlands)
Issue number4
Publication statusPublished - 1 Dec 2020


  • Credit risk
  • Loan guarantees
  • Loan to value
  • Mortgage insurance
  • Mortgage loans

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