Dutch mortgage funds received €2 billion in new investments from institutional investors such as pension funds and insurers in the first three quarters of 2024, DNB figures show. This is less than in previous years and can be attributed to market interest rates having risen sharply during 2022.
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Mortgage lenders have set up mortgage funds, not to extend residential mortgage loans but to enable investors to gain exposure to the portfolios of loans they provide. Modest in size a decade ago (€4 billion in 2013), these investment funds have grown to €82.5 billion over the past ten years, representing some 10% of the total Dutch outstanding mortgage loans.
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From 2021 to the third quarter of 2024, these mortgage funds raised €26.2 billion, with Dutch pension funds accounting for the largest share (€11.9 billion). Other investments included those made by foreign investors (€8.3 billion), who use these funds to gain exposure to Dutch residential mortgage loans.
Having peaked in 2021 (€13.1 billion), mortgage fund investments have been falling since 2022, however. In 2022 and 2023, investments already declined to €7.8 billion and €3.2 billion respectively. The first three quarters of 2024 saw €2 billion invested.
Both Dutch pension funds and foreign investors and insurance firms are showing less interest in Dutch mortgage funds, which can be attributed to market interest rates having risen sharply during 2022. This created a greater supply of interest-bearing investment products offering adequate returns, such as bonds.
In addition, more and more pension funds currently tend to invest directly in residential mortgages, instead of opting for mortgage funds.
In recent years, pension funds and insurance firms have reduced their investment in residential mortgages, both directly and indirectly. Conversely, banks have increased their share of the mortgage market, following a decade in which their mortgage holdings remained relatively constant and growth was primarily driven by institutional investors.
In the first three quarters of 2024, the banks' mortgage portfolio grew by €17.4 billion. For mortgage funds, this figure was €2.0 billion, and for pension funds and insurance firms €2.8 billion and €1.2 billion, respectively. Other financial institutions accounted for €3.8 billion in mortgage loans.
So far, total Dutch outstanding mortgage loans have grown steadily in 2024, rising by €26.9 billion to €881.4 billion in the first three quarters.
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