Mortgage debt of households continues to grow

The total mortgage debt of Dutch households has rocketed in the last ten years and is well on its way to surpassing the amount of the gross domestic product (GDP). The outstanding mortgage debt is still amply covered by the value of the security.

Households deeper in debt

Dutch households have been getting deeper and deeper into debt in the last ten years. The total mortgage debt of households rose from 140 billion euro in 1995 to over 500 billion euro by the end of 2005. This meant that the mortgage debt equalled 99 percent of GDP. In the first half of 2006 it grew by a further 7 percent, to 537 billion euro. The total mortgage debt of Dutch households is expected to exceed GDP for the first time in 2006. The average outstanding mortgage debt is now around 150 thousand euro per house-owning household.

Mortgage debt and GDP

Debt growing faster

In 1995 the total mortgage debt of Dutch households amounted to the equivalent of 46 percent of GDP. In recent years in particular, the increase in this total amount in terms of a percentage of GDP has speeded up substantially. While it took five years (1998–2003) to climb from 60 to 80 percent of GDP, it took only two (2004–2005) to go from 80 to 100 percent.

Yearly increase in mortgage debt and house value index

Mortgage coverage 36 percent

The value of Dutch homes is more than enough to cover the mortgage debt. At the end of 2005 the total outstanding mortgage debt was 36 percent of the total taxable value of the properties of 1,392 billion euro. Remarkably, the mortgage debt has risen by more in recent years than the house value index, which measures the value of owner-occupied homes, excluding new construction. Increases in property values were relatively moderate in the last three years and the first half of 2006, while the total outstanding mortgage debt rose very quickly.

Financial capita growing

In spite of the substantial increase in the mortgage debt, the financial capital of households has improved since 2002, after two years of decrease. At the end of 2005 the financial capital of households was at its highest since 2000, at 921 billion euro. The largest part of this capital consists of provisions for pension and life insurance. The amount of these reserves rose to 856 billion euro in  2005. The increase was mainly caused by increases in share prices.

Frederik Heinsius and Bart Meijer