Competition on the mortgage market is increasing. The traditional large banks are losing market share to new entrants. This results in a lower mortgage interest rate, but also has disadvantages.
Competition mortgage market
The consultancy firm Good Finance publishes an update every quarter on the relationships on the mortgage market. In their most recent analysis, they again come to the conclusion that competition in the mortgage market has increased.
We also discuss this development in our 2016 mortgage interest rate forecast.
Large banks are losing market share
The time when almost 3 of the 4 mortgages were taken out via a large bank is behind us. The top three banks in the Netherlands have seen their market share fall since 2011 from nearly 70% to less than 50%.
- Update 1: In the third quarter of 2015, the market share of major banks fell for the first time to less than 50%.
- Update 2: In the fourth quarter of 2015, the percentage of closed mortgages through the major bank fell again to 48.5%.
- Update 3: In the first quarter of 2016, slightly more mortgages were taken out through the major banks.
Small banks and foreign providers
The growth of small banks and foreign providers will remain somewhat stuck after 2014. They together have 10% of the mortgage market. These lenders often profile themselves temporarily in the market. Only Argenta has become a fixed value. This Belgian bank regularly offers the lowest mortgage interest.
Return and low risk
New lenders are entering the Dutch mortgage market for the favorable return with a low risk. This is nowadays not only reserved for a select number of banks. Other investors can also contribute capital through a so-called control party. Currency mortgages is an example of such a construction.
Together, the control parties now hold 22% of the mortgage market. This market share stood at 10% at the beginning of 2015 and therefore grew strongly in the second half of the year. The market share of these new investors is expected to grow further in 2016. These control parties have less strict capital requirements than traditional banks. With the still growing mortgage market, this offers opportunities to further increase market share.
Lower mortgage interest
Consumers benefit from these new lenders. To capture market share, newcomers often offer a competitive mortgage interest rate. They also often focus on a specific target group, so that the conditions are better aligned with the consumer. This puts competition under pressure and ensures lower mortgage rates and better conditions. We also see that lenders adjust their mortgage interest rates more quickly to market interest rates. With an interest rate cut, other banks follow immediately.
Disadvantages of new lenders
There are also disadvantages to investors’ massive interest in the Dutch mortgage market. There is a chance that they are only interested in the most attractive customers (low risk). In addition, it is not inconceivable that investors will stand out from the market when other investments absorb more returns. This is disadvantageous for customers who have to renew their mortgage.