Dutch central bank's mortgage warning

2nd November 2011, Comments 0 comments

The Dutch government has been told to move quickly to cut back the generous tax breaks currently available on mortgage interest payments.

Klaas Knot, president of the Dutch central bank, says the enormous mortgage debt owed by Dutch households constitutes a major risk to the financial system.

The current regime of tax relief encourages people to take out large mortgages and not to hurry about paying back the actual loan capital. In August this year the government banned 'interest-only' mortgages. These allow home-buyers to make interest payments only on their loans for extended periods.

Mr Knot says this measure is not enough. He believes tax relief should be reduced gradually during the lifetime of a mortgage. Dutch mortgage debt ranks among the world's largest and threatens the country’s households and banks, he warns.

The response to Mr Knot from the deputy finance minister was brief but clear: “This government isn’t going to mess with mortgage tax relief”.

© Radio Netherlands Worldwide

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