Changing mortgage rules punishes first-time buyers: Dutch central bank, Market watchdog

Increasing borrowing limits for homebuyers is seen as undesirable, but capping the maximum loan amount is also not recommended. Such a restriction would make it even tougher for first-time buyers to get onto the property ladder, according to a new report by De Nederlandsche Bank (DNB) and the Netherlands Authority for the Financial Markets (AFM).

The regulators have repeatedly warned that loosening borrowing rules could push house prices even higher. DNB and the AFM explain that when people can borrow more, they tend to bid more, resulting in increased household debt.

However, they argue that restricting borrowing limits now is not advisable either, despite the fact that the maximum mortgage in the Netherlands currently equals 100 percent of a home’s value. “Reducing this limit could help safeguard financial stability, but it would primarily make it more difficult for first-time buyers to purchase a home,” they say.

DNB and the AFM say that soaring house prices are making it extremely difficult for first-time buyers to enter the housing market. Young buyers are often forced to take out the maximum mortgage possible, increasing their debt burden. “This leaves them vulnerable if they lose their job or experience a significant drop in income,” the regulators warn.

The Netherlands Bureau for Economic Policy Analysis (CPB) observes that homeownership is increasingly unattainable for many households. The government’s main advisory body is releasing a housing market report on Tuesday. Using 2024 data, the CPB finds that buying an average home now requires nearly twice the median income. The shortfall between the home price and the maximum mortgage averaged 100,000 euros, an amount most young households cannot cover with their savings.

DNB, the AFM, and the CPB agree that increasing the supply of homes is crucial to easing the housing market problems. They also call again for the phased reduction of tax benefits for homeowners. According to the CPB, measures like mortgage interest deductions and low imputed rental values tend to push prices up. “Scaling back these benefits could reduce housing demand and help make homeownership more attainable,” the report notes.