Dutch mortgages

Mortgage news in the Netherlands: penalties, interest rates and the NHG limit

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With recent changes in penalties for prepaid mortgages, fluctuating interest rates and higher maximum prices for NHG-backed mortgages, expats may find getting a mortgage in the Netherlands a bit more interesting.

Expat financial adviser Finsens explains the recent news in the world of Dutch mortgages, and how they will affect expats looking to buy a house in the Netherlands.

Lower penalty rates on early repayment of Dutch mortgages

Those who have paid off their mortgages in the Netherlands early—and paid a steep penalty to do so—may see at least some of that money returned, thanks to new rules from the Dutch Authority for the Financial Markets.
Research has shown that many banks have calculated excessively high penalty interest rates. To combat this, the Dutch Authority for the Financial Markets (AFM) released a set of guidelines on 20 March that outline new rules for banks when calculating penalty interest rates for the early repayment of Dutch mortgages. 
Penalty interest usually does not apply if the mortgage is prepaid as part of the sale of the property; most banks allow prepayment of the mortgage without penalty in such cases. 
The new AFM calculation rules do not apply to the penalty interest levelled in the event of interest revision using the average of one’s original rate and the current market rate.
Banks will recalculate the penalties for all mortgage transfers made after 14 July 2016, most of which have indicated that they will be informing their clients of the issue in the coming months. Dutch bank ABN AMRO is giving itself a bit more time, saying their clients will be informed within a year. Due to European legislation, however, banks are obligated to recalculate the penalties immediately. Banks will not recalculate the penalty interest rates for any mortgage prepayments (and penalty interest calculations) made prior to 14 July 2016.
If it turns out that someone has paid too high a penalty for prepaying their mortgage, the difference must be refunded. 
Mortgages in the Netherlands

Interest rate expectations

Although European Central Bank’s (ECB) inflation target of 2 percent was reached for the first time in February, the economy has not yet showed signs of improvement. At the end of 2016, the ECB extended its buy-back programme until December 2017, and the EU’s monetary policy will once again curb mortgage interest rates in 2017. Because of this, there is no expectation of a sharp decrease in interest rates as in 2016.
On the other hand, interest rates will be more unpredictable this year. However, in spite of the fluctuation, the maximum difference between highest and lowest interest rate thus far is 0.3 percent. By the end of 2017, ABN AMRO expects the flat interest rate for 10 years to be around 0.5 percent higher.

Higher maximum prices for NHG-backed mortgages

The lowest interest rates for mortgages generally fall under the Dutch National Mortgage Guarantee scheme. Compared to mortgages at property market value, the annual difference is around 0.5 percent. However, NHG-backed mortgages require that recipients pay a one-time 1 percent fee. An NHG-backed mortgage is available for houses that do not exceed a property value of EUR 245,000. In 2016, the maximum purchase price was set at EUR 231,132; 2017, therefore, marks for the first time there has been an increase in the maximum purchase price for NHG mortgages since it started decreasing in 2012. 
Finsens / Expatica


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