AFM Consumer Monitor Q4 2023: Mortgage Holders

AFM Consumer Monitor 2023
Q4 | Mortgage Holders
January 10, 2024 dr. Millie Elsen
Joost Leenen, MSc.
Benjamin Feher, MSc

Background
The AFM advocates for fair and transparent financial markets. As an independent behavioral supervisor, the AFM contributes to sustainable financial well-being in the Netherlands. The Consumer Monitor provides insight into developments in consumer behavior over time. The monitor was launched in 2004 and has been conducted every six months since then among various target groups. Since 2022, the monitor has been conducted by Centerdata. The primary objectives of the Consumer Monitor are:

• describing the behavior and attitudes of financial consumers;
• describing market and product aspects in the financial market.
  Guide to Reading
  This report contains the results of the Consumer Monitor conducted in October 2023 (Q3 2023) on the sub-topic "Mortgages." The fieldwork was conducted in the LISS panel between October 2 and October 30, 2023. The questionnaire was administered to a (random) sample of Dutch households with a mortgage. Within each household, the questionnaire was completed by the person most involved in the financial administration of the household. The questionnaire covered various topics, including the choices made regarding mortgage type and interest fixation period, financial risks, and home sustainability. The mentioned differences between groups of mortgage holders (such as age groups) in this report are statistically significant (p < 0.05), unless stated otherwise.

Table of Contents
Introduction 2
Mortgage Type 3
Mortgage Interest Rate 12
Extra Repayments 19
Interest-Free Mortgage 23
(Covering) Risks 27
Home Sustainability 35
Contact with Mortgage Advisor and Lender 41
Financial Situation 45
Research Methodology and Sample Description 47

Mortgage Type

• Approximately 8 out of 10 mortgage holders (81%) know how many loan components their mortgage consists of (13% do not know and 6% prefer not to say).

• For most mortgage holders who know how many loan components their mortgage consists of, the mortgage consists of one (43%) or two (34%) loan components (average = 1.9).

• For slightly more than half of this group (57%), the mortgage consists of one mortgage type. Some mortgage holders have multiple loan components with the same mortgage type (e.g., two annuity mortgage components). Approximately 4 out of 10 mortgage holders have two mortgage types. This is usually a combination of an annuity mortgage and an interest-free mortgage.
  For most mortgage holders, the mortgage consists of a maximum of two loan components and a maximum of two mortgage types Question (left): How many loan components does your mortgage consist of?
  Question (middle and right): Please indicate below for each loan component (1) what the mortgage type is and (2) what the outstanding debt (the amount still to be repaid) is.
  Base (figure left and middle) = mortgage holders who know how many loan components their mortgage consists of, n = 613 Base (figure right) = mortgage holders with two different mortgage types, including an interest-free mortgage: n = 214, including an annuity mortgage: n = 165

• Approximately two-thirds of mortgage holders have an (partially) interest-free mortgage. This share increases significantly with age, from 12% among 18-34 year olds to 94% among those 65 and older (35-44 years: 55%, 45-54 years: 74%, 55-64 years: 73%).

• Approximately half of mortgage holders have an annuity mortgage (or annuity loan component). This share decreases with age, from 80% among 18-34 year olds to 22% among those 65 and older (35-44 years: 72%, 45-54 years: 57%, 55-64 years: 36%).

• Mortgage holders with medium (mbo, havo/vwo; 55%) and higher education (hbo, wo; 54%) are more likely to have an annuity mortgage than mortgage holders with lower education (primary education, vmbo; 34%).

• There were no significant shifts in 2023 compared to 2022.
  An (partially) interest-free mortgage is (still) the most common mortgage type among mortgage holders Question: Please indicate below for each loan component (1) what the mortgage type is and (2) what the outstanding debt (the amount still to be repaid) is. *The percentages do not add up to 100% because mortgage holders can have loan components with different mortgage types. Base = mortgage holders who know how many loan components their mortgage consists of, 2022: n = 580, 2023: n = 613

• The 613 mortgage holders who know how many loan components their mortgage consists of reported a total of 1153 loan components. Of these 1153 loan components, approximately 40% are annuity and approximately 40% are interest-free.

• The median outstanding debt (self-reported, per loan component) is approximately €85,000 for interest-free mortgage components, €75,000 for annuity mortgage components, €95,000 for linear mortgage components, and approximately €112,000 for bank savings mortgage components.

• The median total outstanding debt per mortgage holder is approximately €161,000 (25th percentile: €100,000; 75th percentile: €259,000).
  Of all loan components of mortgage holders, approximately 40% are annuity and approximately 40% are interest-free Question: Please indicate below for each loan component (1) what the mortgage type is and (2) what the outstanding debt (the amount still to be repaid) is. *Note: The number of observations is low (n < 100). Base (figure left) = all loan components, n = 1153 (loan components) Base (figure right) = loan components with the respective mortgage type, n = 528 (interest-free mortgage), n = 428 (annuity mortgage), n = 57 (linear mortgage), n = 66 (bank savings mortgage), n = 33 (life mortgage with savings insurance)

• 4 out of 10 mortgage holders state they have a mortgage with National Mortgage Guarantee (NHG).

• Mortgage holders who closed their mortgage through an intermediary were more likely to choose a mortgage with NHG (45%) than mortgage holders who closed their mortgage directly with a bank/insurer (32%).
  4 out of 10 mortgage holders made use of the National Mortgage Guarantee Question: Did you also make use of the National Mortgage Guarantee (NHG) when closing the mortgage?
  Base (figure left) = all mortgage holders, 2022: n = 692, 2023: n = 749 Base (figure middle) = mortgage holders who closed their mortgage via an intermediary, 2022: n = 378, 2023: n = 399 Base (figure right) = mortgage holders who closed their mortgage directly with a bank/insurer, 2022: n = 269, 2023: n = 276

• For mortgage holders where both the outstanding debt and the WOZ value (official municipal property value) of the home are known, the loan-to-value (LTV) can be calculated.

• In 2023, the LTV decreased further: for 2% of mortgage holders, the outstanding debt is higher than the WOZ value of the home (compared to 6% in 2022).

• In 2023, the median LTV is estimated at 46%.
  Within the group with an LTV higher than 100%, the median LTV is 108%.
  Base = mortgage holders where LTV is known,
  2022: n = 527, 2023: n = 590
  2 out of 100 mortgage holders* state they have an outstanding debt higher than the WOZ value of the home *Mortgage holders where both the outstanding debt and the WOZ value of the home are known (77% of the sample) Loan-to-value (LTV) = (outstanding debt / WOZ value of the home) * 100% LTV unknown: 26% 23%

• Three-quarters of mortgage holders with an outstanding debt lower than 85% of the WOZ value of the home (73%) are aware of the possibility to use the equity for an additional mortgage component (e.g., a top-up). Approximately half (51%) are aware of the possibility to use the equity for a buy-to-let mortgage, and one-third (36%) are aware of "sale-and-lease back."

• One-third of mortgage holders with equity (34%) find the possibility to use the equity for a buy-to-let mortgage interesting. The possibility to use the equity for an additional mortgage component or "sale-and-lease back" is found interesting by 24% and 15% of this group, respectively.

• Awareness of the possibility to use the equity for a buy-to-let mortgage increases with age (18-34 years: 28%, 35-44 years: 42%, 45-54 years: 48%, 55-64 years: 63%, 65+: 70%). Those 65 and older are also more aware of "sale-and-lease back" than those aged 18-54.
  Mortgage holders with equity are most interested in a buy-to-let mortgage; one-third find this possibility interesting Question: You have equity if the value of your home on the housing market is higher than the mortgage. Is your home, for example, worth €400,000 and the mortgage €350,000? Then you have €50,000 in equity. The equity of the home can possibly be used for (1) an additional mortgage component (e.g., a top-up), (2) buy-to-let mortgage, (3) sale-and-lease back, if this fits within your financial situation. Indicate whether you were already aware of this, if it seems interesting to you, and if you have made use of it. Base = mortgage holders whose outstanding debt is lower than 85% of the WOZ value of the home, n = 702 *Note: The number of observations is low (n < 100).

• Of the mortgage holders who are interested in using their equity (for an additional mortgage component, buy-to-let mortgage, and/or "sale-and-lease back"), slightly more than 4 out of 10 (44%) would like to use the equity for a renovation or adjustment of the home. The mortgage holders who have actually used their equity have mostly also used it for this purpose (49%; however, the number of observations is low).

• One-third of mortgage holders who are interested in using the equity would like to use the equity to make their home more sustainable (33%). Slightly more than a quarter (27%) would like to use the equity to retire earlier.
  Base = mortgage holders whose outstanding debt is lower than 85% of the WOZ value of the home, who find the possibility to use their equity interesting (n = 279) or have used their equity in one of the three ways (see previous page) (n = 47) Most mortgage holders would like to use the equity for a renovation or home sustainability *Note: The number of observations is low (n < 100).

1 out of 10 mortgage holders would like to move within the next two years

• Almost 1 out of 10 (9%) mortgage holders would like to move within the next two years (and 16% maybe).
  Question: Do you wish to move within the next two years? Base = all mortgage holders, n = 749

Mortgage Interest Rate

• 96% of mortgage holders state they have a mortgage (component) with a fixed interest rate and 4% have a mortgage (component) with a variable interest rate.

• 93% say they have a mortgage with only a fixed interest rate and 2% have a mortgage with only a variable interest rate. 2% state they have both a mortgage component with a fixed interest rate and a mortgage component with a variable interest rate (3% do not know for all loan components).

• Most mortgage holders with a mortgage (component) with a fixed interest rate state they have an interest fixation period of 6-10 years (37%) and/or 16-20 years (37%). 1 out of 5 mortgage holders (22%) has a mortgage (component) with an interest fixation period of more than 20 years.

• Of the mortgage holders with a mortgage (component) with a fixed interest rate, 14% have mortgage components with different interest fixation periods (84% have a mortgage with one interest fixation period).
  Four out of ten mortgage holders state they have a mortgage (component) with an interest fixation period of 10 years or less Question: Please indicate below for each loan component (3) whether the interest rate is fixed or variable. Indicate for each loan component with a fixed interest rate (4) what the interest fixation period is and (5) when it expires. Note: The percentages in the figures do not add up to 100% because mortgage holders can have loan components with different interest forms and interest fixation periods. Base (figure left) = mortgage holders who know how many loan components their mortgage consists of, n = 613 Base (figure right) = mortgage holders with a mortgage (component) with a fixed interest rate: n = 583

• 6 out of 10 mortgage holders (59%) state they have a mortgage (component) whose interest fixation period expires in at least 10 years. 1% state they have a mortgage (component) whose interest fixation period expires in 2023 or 2024.

• 7 out of 10 mortgage holders with a mortgage (component) with a fixed interest rate made a choice regarding the interest fixation period of their mortgage in the last 5 years. Approximately 3 out of 10 (29%) did this in the last 2 years.
  1 out of 10 mortgage holders states they must decide on a new interest fixation period within 3 years 14 Question (left): Indicate for each loan component with a fixed interest rate [...] when it expires. Question (right): When did you last make a choice regarding the interest fixation period of your mortgage? Note: The percentages in the left figure do not add up to 100% because mortgage holders can have loan components with different interest forms and interest fixation periods. Base = mortgage holders with a mortgage (component) with a fixed interest rate: n = 583

• Most mortgage holders expect to extend their existing mortgage when the interest fixation period expires. Of the mortgage holders whose interest fixation period expires within 3 years, approximately 1 out of 10 does not yet know what they will do (12%).

• Almost half of the mortgage holders with a mortgage (component) with a fixed interest rate made their last choice regarding the interest fixation period when closing the (first) mortgage (47%). Slightly more than a quarter changed the interest rate (28%) and a quarter adjusted the interest fixation period (26%).
  Most mortgage holders expect to extend their existing mortgage when the interest fixation period expires 15 Question (left): [For the loan component whose interest fixation period expires first:] When your interest fixation period expires, you must make a new choice regarding your mortgage. What choice do you think you will make? Question (right): You indicated that you [...] made a choice regarding the interest fixation period of your mortgage last time. What did you do then? Base (figure left) = mortgage holders with a mortgage (component) with a fixed interest rate, n = 583 Base (figure right) = mortgage holders who know when they last made a choice regarding the interest fixation period: n = 566. *Note: The number of observations is low (n < 100).

• 1 out of 40 mortgage holders with a mortgage (component) with a fixed interest rate thinks (likely) to come into financial trouble when the interest fixation period expires. This share has not changed compared to 2022 (3%).

• Of the same group, approximately 1 out of 6 thinks (likely) they will not be able to pay the monthly mortgage costs if these costs were 1.5 times higher due to a doubling of the interest rate (17%).
  9 out of 10 mortgage holders with a fixed interest rate do not expect to come into financial trouble when the interest fixation period expires Base = mortgage holders with a mortgage (component) with a fixed interest rate, 2022: n = 552, 2023: 583 Question (top): Do you think you will come into financial trouble when your interest fixation period expires? Question (bottom): Suppose the interest rate doubles and your monthly mortgage costs become 1.5 times higher as a result (for example, from €1,000 per month to €1,500 per month). Do you think you can pay the increased monthly costs?

• In 2023, 7 out of 10 mortgage holders with a mortgage (component) with a fixed interest rate state that they take into account the possibility of a sharp interest rate increase when (re-)choosing the interest fixation period (69%). Approximately 1 out of 10 states they do not take this into account. We see no significant shift compared to 2022.

• Of the mortgage holders whose interest fixation period (of one or more loan components) expires within 3 years, almost everyone (98%) is aware that monthly costs may change when they sign a new interest contract, just as in 2022. Most mortgage holders expect their monthly costs to rise (51%) or have no idea what the consequences will be for their monthly costs (28%). In 2023, slightly more mortgage holders expect their monthly costs to decrease (20% vs. 15%), but this difference is not significant.
  7 out of 10 mortgage holders take a possible interest rate increase into account when making a (new) choice for an interest fixation period 17 Base (figure left) = mortgage holders with a mortgage (component) with a fixed interest rate, 2022: n = 552, 2023: n = 583 Base (figure right) = mortgage holders whose interest fixation period of one or more loan components expires within 3 years, 2022: n = 75, 2023: n = 110 *Note: The number of observations is low.

Almost half of the mortgage holders whose mortgage interest deduction expires at some point do not know exactly when it expires

• Approximately half of all mortgage holders (51%) state that their mortgage interest deduction expires at some point. Slightly more than half (54%) of that group states they know exactly in which year the mortgage interest deduction expires; slightly less than half do not know (46%).
  Question (left): Does your mortgage interest deduction expire at some point?
  Question (right): Do you know (per loan component) in which year your mortgage interest deduction expires exactly?
  Base (figure left) = all mortgage holders, n = 749 Base (figure right) = mortgage holders who state that their mortgage interest deduction expires at some point, n = 379

Extra Repayments

• 4 out of 10 mortgage holders (38%) have (ever) made extra repayments on the mortgage and 1 out of 10 (11%) have (ever) increased the mortgage amount.
  These percentages remained the same in 2023 compared to 2022.

• Approximately half (47%) of the mortgage holders who have (ever) made extra repayments did so one year or less ago. Of these, the largest group – almost half (47%) – makes occasional, irregular extra repayments. Approximately 2 out of 10 make regular extra repayments (e.g., every year) and 3 out of 10 involved a one-time extra repayment.
  Almost 4 out of 10 mortgage holders have ever made extra repayments on the mortgage 20 Base (figure left) = all mortgage holders, 2022: n = 692, 2023: n = 749 Base (figure middle and right) = mortgage holders who have ever made extra repayments, n = 294 Question (left): Have you ever made extra repayments on the mortgage you currently have? Question (middle): How many years ago did you last make an extra repayment on your mortgage? Question (right): Do you make extra repayments more often?

• The most mentioned reasons for making extra repayments on the mortgage are (1) lowering monthly costs (70%), (2) low interest on savings (34%), and (3) not liking to have mortgage debt (31%).
  Lowering monthly costs remains the most important reason for making extra repayments Base = mortgage holders who have ever made extra repayments, 2022: n = 277, 2023: n = 294 *Added in 2023

• Just as in 2022, approximately 4 out of 10 mortgage holders do not know in 2023 that they may qualify for a lower mortgage interest rate by making extra repayments; 6 out of 10 mortgage holders are aware of this.

• Of the mortgage holders who know they may qualify for a lower rate by making extra repayments, approximately 3 out of 10 (28%) have also taken actual steps (this is 16% of all mortgage holders). Another 1 out of 5 (22%) stated that this was automatically adjusted by the mortgage lender (13% of all mortgage holders).
  4 out of 10 mortgage holders do not know that by making extra repayments they may qualify for a lower mortgage interest rate 22 Base (figure left) = all mortgage holders, n = 749 Base (figure right): mortgage holders who know that by making extra repayments they may qualify for a lower rate, n = 446 "The interest you pay on your mortgage depends on the amount of the mortgage debt in relation to the value of your home. When you make extra repayments or if the value of your home increases* your debt decreases in relation to the value of your home. As a result, you may qualify for a lower mortgage interest rate." *Added in 2023

Interest-Free Mortgage

Question (left): How do you plan to repay your interest-free mortgage at the end of the term? Multiple answers possible.
Question (right): Do you think you will come into financial trouble when your interest-free mortgage (component) expires?
Base = mortgage holders with an (partially) interest-free mortgage, 2022: n = 413, 2023: n = 429 Slightly more than 1 out of 7 of the mortgage holders states they do not

• Most know how they will repay their interest-free mortgage (component)
  mortgage holders with an interest-free mortgage (component) are planning to repay the interest-free mortgage by taking out a new mortgage (32%), making interim repayments (26%), selling the home (23%), and/or building up assets outside the mortgage (20%).

• Compared to 2022, in 2023 more mortgage holders plan to repay the interest-free mortgage by taking out a new mortgage (32% vs. 24%).

• 2 out of 100 mortgage holders with an interest-free (component) expect to come into financial trouble when the interest-free mortgage expires. The share that expects "definitely not" to come into financial trouble when the interest-free mortgage expires has increased, from 46% in 2022 to 54% in 2023.

• Almost 1 out of 7 mortgage holders with an (partially) interest-free mortgage states they were approached by their mortgage lender or advisor in the past year regarding the risks of this mortgage; this is less than in 2022.

• Approximately 6 out of 10 mortgage holders who were approached were (very) satisfied with the information received; 4% were dissatisfied or very dissatisfied.

• 6 out of 10 mortgage holders with an (partially) interest-free mortgage are willing to share information about their financial situation with the mortgage lender, so that an estimate can already be made regarding the financial situation after the mortgage expires. This percentage has not changed from last year.
  6 out of 10 mortgage holders with an (partially) interest-free mortgage are willing to share financial information with their mortgage lender to gain insight into their financial situation after the mortgage expires 25 Base (figure left and right) = mortgage holders with an (partially) interest-free mortgage, 2022: n = 413, 2023: n = 429; Base (figure middle) = mortgage holders with an (partially) interest-free mortgage who were approached in the past 12 months, n = 56 Question (right): Are you willing to share information about your current financial situation with your mortgage lender, so that an estimate can already be made whether you can continue to pay the remainder of your mortgage after the term of the current mortgage? *Note: The number of observations is low (n < 100). 13% were approached in one or more ways (2022: 23%)

• 7 out of 10 mortgage holders know that an interest-free mortgage during the term
  ...