Mortgage Update | Q1 – 2020 | Strong first quarter due to an increasing number of people taking out refinancing and additional loans

By Hypotheekupdate, Mortgage Update, News

Utrecht, 18 May 2020 – The number of mortgages during the first quarter of 2020 grows by 22.8% compared to the first quarter of 2019. Also, the average mortgage value has increased, which has led to an increase in mortgage revenue by 28.4%. This shows that the COVID-19 crisis has not negatively influenced the mortgage industry during the first quarter of 2020. 

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‘The strong growth is mainly driven by customers that are willing to refinance and take out additional loans. Additionally, we see that the average mortgage value continues to grow. Those two factors accelerate the total mortgage revenue growth.’ according to Joppe Smit of management consulting firm IG&H. The average mortgage value currently amounts to 337.000 euros, which means that it has increased by 2.8% compared to the 4th quarter of 2019. The average mortgage value continues to increase for all groups, but the strongest growth (+5.4% compared to Q4 2019) can be found among existing homeowners who transfer to a new home. This indicates that the Dutch mortgage market has not yet faced the inevitable downturn caused by the COVID-19 pandemic. 

The amount of people that refinance and take out additional loans continues to grow
The major share of mortgages is still taken out by existing homeowners transferring to new homes, but the people that refinance their mortgage or take out additional loans have almost caught up with the transferors. The group of transferors expands increasingly (+45.9% compared to Q4 2019), while the first group displays a lower level of growth (+10.0% compared to Q1 2019). This results in a growth rate of 22.8% compared to Q1 2019 for the entire market. “The accelerated growth in transfers could be a response to an increasing interest caused by the COVID-19 pandemic. This group wants to utilize this window of opportunity while it lasts.” according to Joppe Smit. 

Downward momentum continues for banks
Banks, and specifically the top-3 banks, have not yet been able to reverse the existing downward momentum in Q1 2020. Their market share has decreased for a second quarter in a row. This means that the top-3 banks have a cumulative market share of 47.9%, which is the lowest point since 2016. Investment funds that enable non-bank lending take advantage of the downward momentum of banks by accumulating a market share of 19.9%. Munt continues to have the highest growth and secures the 4th spot. ING and Florius experience the strongest decrease this quarter. The downward spiral that Florius is currently facing, has made them fall outside the top 10. 

Industry collective Duurzaam Wonen
IG&H is one of the supporting organisations that have recently launched the industry collective Duurzaam Wonen. More than 80 organisations have joined forces to foster awareness for sustainable housing among customers. To increase awarenessmortgage advisors will receive formal education on sustainability. The collective aims to educate at least 80% of the mortgage advisors in sustainability by the end of 2020For the first time, IG&H reports about the activities and progress of this collective and will continue doing so every quarter. To date, 4,900 advisors have applied and, of which, 3,100 have successfully completed this programme. This implies that an additional 3,000 advisors must complete this programme to meet the industry collective’s goal for 2020 (10,000 advisors in total). 

We wish you great joy in reading this article and would like to invite you to respond! 

Joppe Smit
Director at IG&H
E: joppe.smit@igh.com
T: 06 2035 2438

Authors & data-analysis IG&H mortgage update
Annelies Stemfoort (annelies.stemfoort@igh.com)Brenno Baas (brenno.baas@igh.com) 

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Corona and client activation: do you play to win, or not to lose?

By Banking, Hypotheekupdate, News

Crisis. The view is shifting from a health crisis with an intelligent ‘lockdown’ to an economic crisis ahead. The IMF claims that this crisis will be as bad as ‘The Great Depression’. Is this the right time for you as lender to innovate, generate client value and make impact in society? 

Impact on our societal and economic reality will remain present for a long time 
The ‘new way of working’ has also made its way to the mortgage market because of the corona crisis. Mortgage lenders and advisors have paid a lot of attention to their own ‘corona protocols’ and the creation of a safe work environment in accordance with RIVM’s guidelines these past months. While the occupancy rate on intensive cares is decreasing, people in the Netherlands are looking forward to the 1st of June to grab a beer at the terrace in the new 1,5-meter society. The virus will remain in our midst until the development of a vaccine or medication. Therefore, the impact on our societal and economic reality will continue to remain large.

Lenders risk credit losses and need to prove client value 
The size of the economic impact is still unsure, but the effects have already emerged in several fields. For instance, expenses for travelling and leisure related activities have decreased significantly these past two months. From a macro perspective, the Dutch economy is expected to shrink with 5% till 8% in 2020. This has a direct impact on jobs and therefore the securities that employees have accumulated.

Whereas the mortgage market was an important cause of the previous economic crisis, mortgage lenders now have the right resources at hand to help their clients in this health crisis. As a mortgage lender or advisor, you can prove your added value now by helping your clients with questions and problems they are facing. Above all, now is the time to identify, limit and/or prevent potential financial problems of clients.

Contacting the right clients is of utmost importance 
As the economic outlook darkens and corona guidelines remain, client situations may change. Part of the clients will remain unaffected by the corona crisis. Another part is likely to lose their job but will manage to find temporary employment or have accumulated sufficient money to continue mortgage repayments. Especially elderly have often saved more money, on which they can rely on in these difficult times. And a part will lose their job and must deal with payment difficulties because of their fixed costs. These people might work in the travel or hospitality industry, possibly hired on a self-employed basis. As a mortgage lender, you can prove your added value to these groups by facilitating contact proactively and reactively.

Belief that you achieve more when you differentiate and personalise contact 
The need for information and support for mortgage payments differs strongly, which is why it is important to get in touch with the right clients. In practice, we see that a combination of data insights and principles from behavioural economics are very effective for setting up a differentiated client contact approach. A way of working based on data also helps to generate controllable management information.

Which clients need support and how do you efficiently use your resources
You need to know which clients to approach. Clients in the group that faces payment difficulties, ask for a different approach than the group that still has the savings needed to fulfil their payment obligations. Identifying who you are talking to helps to bring across the right message. It also matters how successful you are in helping clients with mitigating measures. In this way, mortgage advisors and lenders can use their limited time efficiently by sending an aimed message to the right clients. An example of how to combine both is shown in figure 1.


Figure 1: Example segmentation with data driven insight for clients with payment difficulties

Use machine learning for identification of the right client communication
The clients with an urge for help and the highest chance of success are in the red area (figure 1). Machine learning techniques are very effective to identify the right clients, whether it is for clients with payment difficulties or to identify the chance of success when mitigating measures are applied.

Machine learning can use a combination of historical datasets and expert judgement to make an estimation. In this way, characteristics can be identified of clients with a risk for payment difficulties, combined with the success of mitigating measures and this can be plotted against your client portfolio. This is no absolute truth, but it does estimate chances better with a factor of 2 to 3 compared to estimations solely from experts. Subsequently, you can develop feedback loops to keep approaching the right clients with great accuracy and a personalised message that fits their needs and activates them.

Client activation: using insights from behavioural economics 
When the right clients are identified, activating them is the next important step. We can use principles from Behavioural Economics to achieve this. These principles are already successfully being implemented in several places, for instance by our prime minister in his corona speeches. Behavioural Economics uses our knowledge of human psyche to push us in the direction of a preferred action. When it comes to client activation for mitigating potential payment difficulties, there are numerous possibilities. Examples on how to convince clients to perform a certain action are offering a limited amount of options, the majority principle or the ‘profit-or-loss’ framework. The feedback loop and the above-mentioned machine learning algorithms help to gain continuously improving insights into which actions and techniques are most likely to be successful for specific clients.

Conclusion: taking control and generating client value to win 
As a mortgage lender, you can take control in these times, generate client value and avoid or limit payment difficulties. You can do this by using the techniques mentioned in this article, from both machine learning and behavioural economics. By approaching the right clients proactively about their potential problems, you stress your added value as mortgage lender or advisor and truly play to win.

Contact
Joppe Smit
Director at IG&H
E: joppe.smit@igh.com
T: 06 2035 2438

2019 – Q2 | Further mortgage market shrinkage in the second quarter of 2019

By Banking, Hypotheekupdate, News

Mortgage revenue (-9.1%) and the number of mortgages sold (-12.5%) fell sharply

Compared to the same period last year, mortgage revenue fell by 12.5 percent in the second quarter of 2019, as consultancy firm IG&H’s Mortgage Update points out. Since the average mortgage loan only grows to a limited extent, mortgage revenue is also considerably lower than a year ago (-9.1 percent). As a result, this is the third consecutive quarter in which the mortgage market is shrinking on an annual basis.

In the past quarter, the average mortgage loan rose to a record amount of 317,000 euros – only a slight increase (+0.5 percent) compared to the first quarter of 2019 and a clear indication that growth of the mortgage loan is decreasing.

“There are signs across the board that the trend of strong growth in the mortgage market, which has persisted for years, seems to be broken,” says Joppe Smit, who works at consultancy and implementation firm IG&H. “This is the third consecutive quarter in which we observe shrinkage on an annual basis, although the second quarter of 2019 was better than the first three months of the year. Record year 2018 seems to remain unparalleled, which will put an end to the consecutive growth of the past five years.”

Mortgage refinancers grow increasingly important
Most mortgages (more than 31,000) are still taken out by existing homeowners. This is an 8-percent increase compared to the previous quarter. Mortgage refinancers show the strongest quarterly growth with 13 percent. “The number of mortgage refinancers continues to grow,” says Smit. “Mortgage lenders and consultants that specifically target this group can take advantage of this. On the other hand, it makes banks with large mortgage portfolios vulnerable. They will need to do more to retain these customers.”

Mortgage is one click away with an app
A notable trend in the mortgage market is the growing interest of banks and insurers in simplifying mortgage applications. The market is in the early stages of a digital data transition. “Right now, it’s not yet possible to take out a new mortgage on the sole basis of digital data,” says Smit. “Several sources with reliable and verified data have now been unlocked, but the number of sources should be increased. In addition, mortgage lenders should adjust their processes and systems in such a way that digital applications can also be processed immediately. It’s simply a matter of time before we can submit a complete mortgage application with a few clicks.”

IG&H is one of the initiators of ‘Handig!’ (Handy!). The purpose of this partnership between HDN, ING, NHG, Florius, ABN Amro, Rabobank, De Hypotheker, and IG&H is to make the process of applying for a mortgage as fast and complete as possible based on digital, validated source data. “We see that more and more parties are exploring digital possibilities,” says Smit. “DUO, for example, experiments with possibilities to make government data easier to share, but other parts of the government also follow these developments with interest. Developments will accelerate once they get on board, too.”

Sincerely,

Joppe Smit
Director at IG&H
E: joppe.smit@igh.com T: 0031 6 2035 2438

IG&H Mortgage Update – authors & data analysis:
Niels Roelofs (niels.roelofs@igh.com); Sophie Dijkkamp (sophie.dijkkamp@igh.com)

Considerable shrinkage in mortgage market in the first quarter of 2019

By Banking, Hypotheekupdate, News

The amount of mortgages issued fell sharply in the first three months of 2019. According to consultancy firm IG&H’s mortgage update, it was the number of first-time and existing homeowners in particular that dropped significantly. “Currently, we also observe a considerable decrease in the number of mortgage refinancers. In 2018, this group was still responsible for the growth of the mortgage market,” says IG&H’s Joppe Smit.

Click here to read the full report (in Dutch).

The average mortgage loan was €316,000 in the first quarter of this year – a 5.2-percent increase compared to the same period last year. This growth is mainly due to the sharp rise in mortgage loans for mortgage refinancers. In the purchasing market, the average mortgage loan remains virtually constant.

Mortgage revenue is shrinking

In the first quarter of 2019, the total mortgage revenue was nearly €22 billion – a 9.6-percent shrinkage compared to the first quarter of 2018, and the largest since 2013. Compared to Q4 2018, the decrease was as high as 22.8%. In previous years, the usual decrease in Q1 was partly due to a reduction in the maximum loan-to-value on the annual limit and the additional growth in the fourth quarter, which compensated for this.

This year, neither of these developments is perceived. “The sharp decline we currently observe is truly a deviation from the trend after years of growth,” says Smit. “Both the relatively limited housing supply and the difficult position of first-time homeowners are to blame for it.”

Growth in large banks’ share

The banks’ share increased by 2 percentage points to 64.1 percent. This growth mainly comes from the three large banks, which saw their combined market share rise by 1.3 percentage points to 51.3 percent. Investment funds enabling non-bank lending also saw their share grow – by 1 percentage point to 18.3 percent.