On April 21, 2010, the Dutch Authority for the Financial Markets (“AFM”) published new limits on mortgage credit loans. The current standards are being tightened in order to counter undesirable over-extensions of credit from mortgage lenders. Minister of Finance De Jager will implement the tightened regulations in a General Order of Council (“AMvB”).
The most important measures proposed by the AFM are:
· reducing the maximum loan to 112% of the value of the home, the Loan-to-Value (“LTV”) standard, and where repayment is mandatory within seven years to 100%;
· reducing the opportunity to borrow more than the Loan-to-Income (“LTI”) standard, by employing a fixed definition of possible exceptions;
· reducing the opportunity to loan more than is suitable according to income, by differentiating the norms for household types; and
· improving the connection between consumer credit rating and mortgage credit.
There are a number of exceptions set out that justify diverting from the LTV standard. Of particular interest is that, for first-time buyers on the home market, the mandatory repayment within seven years to 100% LTV does not apply to loans with the National Mortgage Guarantee (“NHG”). The AFM also proposes setting consumer credit limits based, in part, on household type, to more accurately reflect the personal situation of the applicant. Three household types have been proposed:
· one-person households, with or without children,
· two-person households without children,
· two-person households with children.
Two-person households with children will thus receive, in principle, less credit than two-person households without children, or one-person households.
The Deputy Minister of Finance will implement the limits for mortgage credit loans shortly in a General Order in Council. With regard to the proposed limits based on household types, the sector has the opportunity to present an alternative proposal, to be analyzed by the AFM, that achieves the same objective of curtailing consumer risks. The starting point will be the implementation of the General Order in Council as of January 1, 2011.