More ABN AMRO clients make early mortgage repayments

The Dutch central bank (DNB) notes that Dutch people withdrew an ‘unusually large amount’ of savings in 2013, about 4 billion euros in total. The money withdrawn was used mainly topay off mortgages, according to DNB. ABN AMRO says its clients pay off more because this is relatively more favourable than saving money, among other reasons. Another contributing factor is greater awareness of the risks of mortgage debt. Expanded donation and repayment options make mortgage repayment attractive. Additionally, fewer houses were sold in 2013, limiting growth of new debt.

Distorted view

Although Dutch people are making additional mortgage repayments, total consumerdebt in the Netherlands is still high – almost three times the amount of disposable income. The Dutch have the second highest mortgage debt in Europe, behind Denmark. This is partly because it has always been possible to borrow more money than the value of the property. Buyers in many other European countries, however, need their own funds in order to be eligible for a mortgage. The popularity of interest-only mortgages also contributes to the relatively high mortgage debt.

Increase in early repayments slowing is down

While the number of early mortgagerepayments increased in 2013, it did so at a slower rate than before. ABN AMRO expects this trend to continue. We think this is because the housing market is slowly climbing out of a trough. Another explanation is that clients prefer to use their savings as a financial buffer rather than paying off their mortgage early.