The country that didn’t learn from the recession

by Justin da Rosa26 Aug 2015
It seems not every country has learned the lesson provided by the United States during the economic crisis, with the Netherlands still offering zero-down mortgages.

The Dutch can borrow as much as 103% loan-to-value for their homes, but that could – finally – be about to change if the government listens to Dutch Central Bank President Klaas Knot.

“High loan-to-value ratios make banks’ and household balance sheets vulnerable and go hand-in-hand with sharper fluctuations in house prices and the real economy,” Knot’s financial-stability committee wrote.

Knott is advising the government to limit mortgage loans to 90% LTV – not an insane suggestion, most would say.

However, Knot is facing tough opposition from several industries and potential buyers.

“The only direction house prices can go is down” if Knot is successful, said Frans Schilder, a senior researcher at the Amsterdam School of Real Estate. “I don’t see a need to use such a kill-or-cure remedy to mortgage debt without offering an alternative, particularly to first-time buyers.”

Still, Knot is suggesting they slowly phase the rule in, asking the next cabinet to consider the plan. The Netherlands will select its next cabinet in 2017.

Slack mortgage lending was a major contributor to the economic downturn in 2008, which the global economy still continues to bounce back from. And while mass delinquincies in the Netherlands – whose economy has much smaller global implications than the U.S.’s – it still may come as a shock to those outside the country that it still offers such high LTVs.

With files from Bloomberg Business


  • by Frank | 8/26/2015 10:05:21 AM

    "Lessons provided by the United States" ??? Which country has the largest debt of the world ? Which country has a the largest budget deficit and does nothing to reduce it ? Which country is repeating the mistakes of the past (car mortgages today are the new sub prime mortgages).

  • by Joop | 8/26/2015 1:29:02 PM

    Knot used other words. You can not compare the American mortgages with the Dutch.
    In the USA you can give your house back to the bank and go away without paying ever more.
    In The Netherlands you always have tot pay every euro back, with interest.
    This is a huge difference. And there are more.


Should CFPB have more supervision over credit agencies?