New mortgage rules discourage elderly from moving, further stalling housing market
New restrictions on interest-only mortgages are expected to discourage older homeowners from moving, further slowing the Dutch housing market. Rabobank and Obvion have announced rules that limit how much of an existing interest-only mortgage can be carried over to a new loan, raising monthly payments for many older homeowners.
Most affected are homeowners aged 57 and older who wish to downsize from larger family homes to smaller residences. Mortgage approvals will be based on projected pension income, which, in turn, will reduce the amount they can borrow. Combined with limits on continuing interest-only loans, monthly housing costs can rise significantly.
A De Hypotheker analysis found that a 57-year-old couple with a combined income of 120,000 euros and a 250,000-euro interest-only mortgage would be able to finance only 150,000 euros under the new rules. The remainder must be repaid or converted to a different mortgage type, potentially increasing annual mortgage costs by nearly 1,750 euros.
“The consequences will be most noticeable in the dynamics of the housing market,” said Mark de Rijke, commercial director at De Hypotheker. “Households that must adjust their interest-only mortgage will face higher housing costs. Such an increase reduces the willingness to move and puts additional pressure on market fluidity.”
Interest-only mortgages remain common, accounting for 45 percent of total Dutch mortgage debt. Among homeowners over 55, 76 percent of mortgages include an interest-only component. Many of these loans will reportedly mature between 2035 and 2038, creating financial challenges for older homeowners.
De Rijke added, “Older homeowners who want to relocate can help increase circulation in the housing market. It is essential they understand their financial situation to avoid unpleasant surprises.”
