First Time Buyers Taking Risks When Applying For Mortgages: AFM

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Based on an analysis of financial data on new buyers, the behavior of people looking to buy a home for the first time is worrying, according to the Dutch Financial Markets Authority (AFM). Their mortgages are often high, student debts are not reported to mortgage lenders, and some are piling up loans.

According to AFM, up to a quarter of new buyers appear to have more than statutory mortgages. This applies to mortgage loans in the amount of 50,000 to 70,000 euros above. The regulator notes that the mortgage is not too high in all cases. Mortgage lenders can deviate from the standard for a good reason, such as if some of the money is used to improve the sustainability of the home.

Student debts are also not always reported, although this is mandatory. The supervisor noted that in 2018, more than two out of five first-time buyers had a student loan. Of this group, 10% did not report debt. According to AFM, recent consumer research shows the problem is getting worse. In particular, first-time buyers may be at risk of not reporting because they are usually less financially stable. AFM will talk to mortgage lenders about stricter compliance with student debt reporting rules.

Another group takes on even greater financial risk by accumulating loans. This group was also more likely to take on higher mortgages. Last year and this year, the standards for consumer loans for the purchase of, for example, a car or a kitchen were tightened, writes The Watchdog. Now this problem seems to be less.

For its analysis, AFM used data from Statistics Netherlands (CBS) for 2013–2018. While they do not provide a definitive picture of overlending, they do show that this is the first time buyers are “taking everything out of the closet to get a home,” according to the watchdog. AFM has launched an investigation among mortgage lenders for compliance with mortgage lending regulations. “The results of this study highlight the importance of this,” the regulator said. AFM also cautioned against even more financial freedom for new buyers, as it will drive up house prices if supply stays the same.

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