Direct lending challenges banks' dominance of Dutch mortgage market

Dutch retail banks' share of the mortgage lending market has dropped to 65% in the last 10 years as institutional investors have increasingly looked to lend directly.

Direct investment has grown as an asset class partly through the arrival of disintermediation, which matches lenders to borrowers, said the Dutch Mortgage Funding Company (DMFCO), which introduced the system in 2014.

In 2008 retail banks accounted for 80% of all mortgage lending, but this proportion has dropped to less than two-thirds in 10 years. Institutional investors now account for a quarter of the €702 bn Dutch market, the fourth largest in Europe, which is forecast to grow to €800-€875 bn by 2025.

The banks' dominance has been hit by tighter regulation introduced in the wake of the financial crisis, including the requirement for greater capital reserves.

Institutional investors in the Netherlands can invest directly via DMFCO's mortgage platform Munt Hypotheken. 'This is beneficial for both investors and consumers, as costs are reduced,' said managing partner Jeroen van Hessen.

DMFCO launched four years ago by investing on behalf of 16 Dutch pension funds and now has €13 bn in assets under management. Other institutional investors have committed capital based on the higher returns on residential mortgages, which are typically 150 to 250 bps higher than Dutch sovereign debt.

The Dutch model has been adopted in other countries such as Sweden, where Stabelo launched last April and has arranged around €500 mln of mortgage lending. 'The Dutch mortgage model is a proven method. That's why we’re using a similar approach in the Swedish market,' said Michael Ingelog, founder and group chairman of Stabelo.


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