Spreads substantially widened this quarter, as mortgage rates caught up with swaps

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The Dutch mortgage market is again defined by significant rate increases over the second quarter of 2022. House prices kept increasing, but lower increases are expected to come. Meanwhile, inflation causes an all-time low consumer confidence, but current consumer spending does not seem to have been affected.

House prices increased, but lower prices are expected to come

Dutch house prices increased 2.80% QoQ and 18.40% YoY this quarter. The number of properties transferred in 2022-Q2 was roughly 47,000, an increase of 7.90% QoQ and a 10.20% decrease YoY. Market forecasts do expect a lower increase of house prices to come.

To make the purchase process more transparent, broker industry organizations agreed to start using a bidding log from 1 July 2022 onwards and will be mandatory from 2023.

Unprecedented mortgage rate increases

Mortgage rates continued to rise even faster than in the volatile first quarter of 2022. In 2022-Q2 the top six most competitive rates increased by 148 bps QoQ and 242 bps YoY on average. After quarter-end, mortgage rates increased by an additional 5 bps on average. Recently, the market is starting to see mortgage providers slightly lowering their rates in higher fixed rate period buckets after a total absence of mortgage rate decreases in the past months.

“Due to consumers’ sentiment towards inflation and their willingness to buy, consumer confidence decreased significantly. This decrease, however, does not seem to have materialized into lower actual consumer spending.”

Jasper Koops

Spreads substantially widened

Mortgage rates caught up with swaps, translating into substantial spread increases across all risk classes and fixed rate periods. This breaks the trend of swaps putting spreads under pressure as in the previous two quarters. Spreads increased by 42 bps on average QoQ and 30 bps YoY.

Consumer confidence plunged to an all-time low, while consumer spending remains stable

Due to consumers’ sentiment towards inflation and their willingness to buy, consumer confidence decreased significantly. This decrease, however, does not seem to have materialized into lower actual consumer spending. Data shows that household consumption is strong and there is no sign of substantial deterioration so far, but uncertainty remains.

Buy-to-let update

A proposal has been submitted to the Dutch Parliament to update the vacant value ratios that apply to buy-to-let properties. These ratios reduce the value of the property for wealth tax (box 3) and inheritance tax purposes. When a property is let and tenants have tenant protection, the rationale is that the property is less valuable.

Disclaimer Dynamic Credit Partners Europe B.V. (‘Dynamic Credit’) is a registered investment company (beleggingsondernemingsvergunning) and a registered financial service provider (financiëel dienstverlener) with the Dutch Authority for the Financial Markets (Autoriteit Financiële Markten). This presentation is intended for informational purposes only and is subject to change without any notice.The information provided is purely of an indicative nature and is not intended as an offer, investment advice, solicitation or recommendation for the purchase or sale of any security or financial instrument. Dynamic Credit may in the future issue, other communications that are inconsistent with, and reach different conclusions from, the information presented herein. Dynamic Credit cannot be held liable for the content of this presentation or any decision made by a third party on the basis of this presentation. Potential investors are advised to consult their independent investment and tax adviser before making an investment decision. An investment involves risks. The value of securities may fluctuate. Past returns are no guarantee for future returns.