Fannie Mae comes to Maastricht as Dutch government backs mortgages
The Netherlands will attempt to revive its faltering housing market by issuing mortgage bonds backed by the state, in a bid to prevent a credit crunch.
The Dutch government is planning to establish a finance company to buy securitized mortgages with government-guaranteed home-loan bonds. The scheme is to be worth £42bn over five years.
The government is seeking to attract new financing for a market now seen as one of the most volatile in Europe, with house prices down 20 per cent since 2008. The plan will need to get the approval of EU regulators to ensure it does not break state aid rules. Dutch Finance Minister Jeroen Dijsselbloem has said that the benefit of such a mortgage finance company would be to provide stability in times of crisis, which would in turn appeal to foreign investors.
There are significant risks associated with state intervention into the housing market and the Dutch government is already on the hook for a vast number of guarantees. The Dutch state has £426bn of direct and indirect loan guarantees as of last year. The risk is that the scheme will lead to another housing boom, and inevitable bust.
The structure of scheme is similar to the operations of Fannie Mae and Freddie Mac, which caused so much damage to the US economy. The Netherlands is particularly vulnerable to the fallout from a housing crash; at the end of last year Dutch mortgage debt totalled 108 per cent of GDP, one of the highest in the world.