Applications for buyers to all-time high
In 2024, the Dutch mortgage market experienced a remarkable recovery after a dip in 2023. This is reflected in a significant increase in the number of mortgage applications: Hypotheken Data Netwerk (HDN) figures show that in 2024, 484,000 mortgage applications were made through HDN, an increase of 29% compared to 2023. This included 303,000 in the buyer's market. A 26% increase in applications for purchasing a home in 2024 resulting in the largest purchase market (in Euros) since the data collection started, see figure 1.
Figure 1: Applications by loan purpose
The recovery was driven by decreasing mortgage rates and rising wages. This improved the affordability for borrowers. Lower rates made it more attractive for borrowers to take out a mortgage. Additionally, increasing wages contributed to extra financial room, leading to an increase in the number of mortgage applications. This development, combined with the increased average market value of owner-occupied homes, which rose by 9.6% to €488,000 in 2024, led to higher average mortgage amounts. The average mortgage amount increased by 8% to €359,500, almost €27,000 more than in 2023.
Consumer confidence in the economy also plays a role in their willingness to take on large financial commitments, such as taking out a mortgage. Positive economic outlooks also have contributed to the recovery of the mortgage market.
The non-buyers market (refinancing and further advances) saw a growth of 35% to almost 181,000 applications. The majority of this market consisted of further advances or second mortgages (76.8%), often used for renovations and sustainability measures. In 2024, a growing number of home owners financed energy-saving measures. In 14.9% of mortgage applications energy-saving measures were financed (+2% versus 2023).
Affordability first time buyers improves
In 2024, first time buyers represent a significant part of the number of mortgage applications. 160,500 starters entered the housing market. In general, first time buyers faced both opportunities and challenges in the mortgage market in 2024. Although rising house prices and competition posed obstacles. First time buyers, in particular, benefited from the decreasing mortgage rates combined with wage increases over the past year. This had a positive effect on the maximum loan amount. However, it remained difficult for first time buyers to take out a mortgage loan. House prices continued to rise, and more equity / family funds must be used by starters.
Loan porting slowly drops
The share of porting applications in the total purchase market slowly decreased over the course of 2024. Since the peak in the share (June 2024 at 32% of the total purchase market), the share dropped month over month to 30% in December.
Figure 2: Applications by loan purpose (%)
The lower rates in the market for new mortgage loans are most likely the main reason. In a recent market update (see our quarterly update Q1-2024 on dmmi.dmpm.nl) we already pointed out that higher market rates than the contract rate are not automatically resulting in a loan port. There is a breakeven point where a new mortgage loan for 30 years results in a lower monthly installment than the installment on the current mortgage loan with a shorter remaining maturity. Also, a remaining interest term of less 10 years on the current loan, may negatively impact the affordability test, because the interest rate on the current loan with a remaining interest term of 10 years will be replaced by a 5% interest rate to test for payment shocks in the affordability. With the declining mortgage rates, the rate difference between the contract rate and the market rates becomes smaller which moves the breakeven point to a shorter time window after origination of the original loan.
Average interest term increases
As pointed out in the previous Quarterly Update, there is an inverse relation between the absolute level of mortgage loan rates and the average interest term. This effect was confirmed over the quarters in 2024, which showed a slight decline of the share of 10 years interest fixed at the benefit of 20 years interest fixed.
Figure 3: Applications by interest rate period
In December, the share of 10 years interest rate fixed periods was 77% of the total market. Broken down by risk class, there is a clear relationship between the risk class and the distribution over the interest terms. The share of 10 year rates in the NHG market is at 72%, whereas in the bucket for the non-NHG market with LTV higher than 90%, the share of 10 year rates is at 84%. For each LTV bucket in between, the share of 10 year interest rates almost increases linearly.
Prepayments pick up
The lower rates in the mortgage market do not only affect the loan porting activity and the distribution over the different interest terms, but also the prepayment activity in the market. As shown in figure 4 below, almost all vintages are prepaying at a faster speed than in in 2023.
Figure 4: Conditional prepayment rate
The most vulnerable vintage (originations in 2023) remains remarkable. This vintage is most sensitive due to the fact that it has a positive interest difference against the current market rates. This vintage is already at a prepayment speed of 7% during last 6 months. The uptick in the prepayments is also visible in the increasing application volumes in the market. The application volume in the market increased from €4.1 billion in 2023 to €5.4 billion in 2024. This is still fractional compared to 2022 when the refinance market was at €26.2 billion, figure 5. However, it confirms our observation that the prepayment speed is increasing in our portfolios.
Figure 5: Application volume refinance
Conclusion
The year 2024 marked a strong recovery for the Dutch mortgage market. The increase in mortgage applications, both in the buyers and non-buyers’ market, and the rise in house prices indicate renewed confidence in the market. The trend of sustainability continues, with a growing number of applications in which energy-saving measures are included. RISKS Although the outlook for the Dutch mortgage market in 2025 is generally positive, there are also some risks that could affect the market. Inflation remains an important risk, see also chapter one. Although inflation has somewhat decreased in 2024, it remains higher than the target level of 2%. This can affect the purchasing power of households and the affordability of mortgages. The continued rise in house prices can further limit the accessibility of the housing market, especially for starters. This can lead to a larger gap between homeowners and renters. In addition, there are threats to Dutch economic growth as a result of international geopolitical uncertainty. The Netherlands remains sensitive to developments abroad, such as in the Middle East and the Russian war in Ukraine. There is also the threat of a trade war with high mutual import tariffs. This uncertainty increased since the election of Donald Trump. A trade war could significantly impact economic growth in the Netherlands. A slowdown in economic growth could lead to a decline in consumer confidence, resulting in a decrease in the demand for mortgages.
Outlook 2025
The outlook for the Dutch mortgage market in 2025 is generally positive. The rising wages, result in a higher maximum mortgage loan for borrowers. This will stimulate the demand for mortgages for both the purchase of homes and for refinancing and increases.
Want to know more?
This article is the third chapter of our Quarterly Market Update for Q4 2024. In this report, we outline developments in the Dutch economy, the housing market and the mortgage market, and conclude with some key portfolio insights.