Dutch mortgage debt is also on the rise. Unlike before, it is mainly institutional investors who are responsible for this growth, rather than the banks. In addition, growth is relatively subdued from a historical perspective in relation to the rise in house prices.
Over the past few decades, banks were the main providers of mortgage loans to Dutch households. In recent years, however, banks’ mortgage portfolios have grown relatively little. Since house prices began rising again in 2014, banks’ mortgage portfolios have grown by €12 billion. Over the same period, mortgage portfolios held by institutional investors – insurers, pension funds and investment funds – grew by €82 billion. Institutional investors thus accounted for 87% of the total increase in mortgage lending to Dutch households (see Figure 1).
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As a result, institutional investors have doubled their share of mortgage loans granted to Dutch households from 10% in early 2014 to 20% in 2021. Recently released long-term time series show that the activity of institutional investors in the mortgage loans market is not a new phenomenon. In 1960, half of all mortgage loans outstanding were on the balance sheets of insurers and pension funds (see Figure 2). Since then, this share has gradually declined in favour of banks. However, since the 2008 credit crisis there has been a turnaround in this trend. The attractiveness of mortgage loans as an investment for institutional investors increased, for instance because the longer maturities of new mortgages matched the long-term nature of their liabilities (DNB, 2016).
Figure 1 also shows total mortgage loans outstanding to have grown by between 2% and 3% annually in recent years (adjusted for inflation). From a historical perspective, such percentages are modest.
The recent rise in mortgage debt has also been relatively muted in relation to house price growth. Moreover, the divergent development of the two variables is notable. The correlation between house prices and mortgage loans is generally high. The stronger rise in house prices than in mortgage debt seen in recent years was only previously observed in the late 1970s and early 1990s.
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