The Netherlands, with residential debt that is among the world’s highest, is considering excluding existing mortgages from government-backed home-loan bonds to ease antitrust concerns.
Banks, pension funds and the Dutch government agreed in September to create a finance company to buy higher-rated securitized mortgages from lenders with state-guaranteed mortgage bonds. In the final plan to be submitted to Parliament and antitrust regulators, existing loans will probably be excluded to avoid giving an advantage to established lenders, the government said in an e-mailed statement today.
The program, which is slated to issue at least 50 billion euros ($69 billion) in bonds over five years, is designed to offer stable and cheaper funding for Dutch lenders, encourage new mortgage providers to enter the market and reduce costs for consumers. Dutch competition authority ACM said last week the plan may, in fact, have the opposite effect.
The finance company, known as NHI, “has to be shaped in such a way that mortgage providers pass benefits on to their customers,” a spokeswoman for Dutch Minister of Housing Stef Blok said in an e-mail today. “Therefore, it seems obvious -- in line with ACM’s analysis -- for instance not to allow financing through the NHI for existing mortgages covered by a Dutch Homeownership Guarantee, or only when when they are up for interest-rate refixing.”
The government asked Jan van Rutte, who stepped down as chief financial officer of ABN Amro Group NV in June, to oversee the process and is confident his plan will meet European Union competition requirements, according to the statement.
According to an initial proposal published in September, the NHI will only accept mortgages covered by a Dutch Homeownership Guarantee, or NHG, to reduce taxpayers’ risk. The 783 million-euro fund, which is also backed by the Dutch government and covered more than 162 billion euros in mortgages through September, compensates lenders in case borrowers must sell their home for less than the value of their loan.
If all NHG mortgages are eligible for submission to the NHI, existing providers, who hold most of them, stand to benefit most, ACM said Dec. 5. This could decrease incentives to enter the market, reduce pricing pressure on the established lenders and lead to higher rates, it said.
The agency said in an April study that Dutch borrowers pay more in mortgage interest because there is too little competition. Since 2008, the Dutch are served by a shrinking pool of lenders after banks tried to cut debt and limit lending, in part to meet regulatory demands. The three biggest domestic banks, ING Groep NV (INGA), ABN Amro and Rabobank Groep, had 84 percent of the mortgage market in 2012, according to the nation’s central bank.
Dutch mortgage debt more than doubled from 2000 to 2008 and is among the world’s highest at 651 billion euros, or 108 percent of gross domestic product, as of the end of last year. That’s left lenders reliant on capital markets for funding as there is a gap of about 450 billion euros between loans and deposits, according to the central bank.
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