Gov't could decrease mortgage lending limit due to higher living expenses
Budget institute Nibud will likely advise the government to reduce the mortgage lending limit next year. Inflation and skyrocketing energy prices mean that living expenses are rising fast, so people should lend less to avoid getting into financial trouble, Het Parool reports.
Nibud is currently finalizing its advice to the Ministry of Finance on the lending standards for 2023. “We are still calculating what the borrowing capacity will be,” Nibud researcher Marcel Warnaar said to the newspaper. But the unprecedented high energy prices and inflation will probably mean Nibud will restrict the maximum amount people can lend to buy a house.
Warnaar and his team calculate the maximum people can spend on housing costs and still have money left for other necessities like food, clothing, and energy. Normally, Nibud works based on the average of the past four years. But this year is different. “With the declining purchasing power and rising inflation at the moment, it is important to look at this very carefully,” Warnaar explained. “Purchasing power will decline this year and next, so borrowing capacity is expected to decrease.
Nibud will submit its advice to the Ministry of Finance before October 1. The Minister will then let the banks know what the lending standards will be. Banks are not allowed to lend more than the standard.
Home buyers are already able to borrow less than in the past years. The mortgage interest rate has increased by 2.5 percent this year to over 4 percent for a fixed-interest period of 20 years.
The higher interest rates mean people have to borrow less to afford their repayments, decreasing the borrowing capacity by tens of thousands of euros.
The higher mortgage interest rates have already resulted in house price increases slowing down. Statistics Netherlands even recorded a slight month-on-month decrease in home prices in August. Add the lower mortgage lending limit on top of that next year, and house prices are expected to fall.