Stable number of mortgage applications thanks to first-time buyers

The number of mortgage applications has remained remarkably stable over the past 6 months, and this can largely be attributed to first-time homebuyers. The combination of rising wages and lower home prices has made buying a first home more accessible. In contrast, the mortgage refinance market has virtually dried up as a result of higher mortgage rates.

A total of 31,553 mortgage applications were made in April, which is similar to the average number of applications over the past six months, according to data from Hypotheken Data Netwerk (HDN). However, the average mortgage amount per application did decrease from a year ago. For first-time buyers, the average mortgage amount fell by more than 6% to €320,046, while for those moving on, the drop was 10% (€339,096).

Decrease in mortgage applications in the non-buyer market

The number of mortgage applications dropped significantly (-42%) compared to April 2022. This decline is mainly caused by the non-buyer market drying up. These are people who apply for a mortgage to refinance and not to purchase a new home. Increased mortgage interest rates have made refinancing less attractive. However, the number of applications to finance a new home has remained relatively stable.

Startups dominate mortgage market

It seems that first-time buyers currently have the upper hand in the housing market. In April, a whopping 55% of mortgage applications to buy a home came from first-time buyers. This is a significant increase from past years, where the percentage was around 45%.

Improved outlook for housing market starters

The average wage in the Netherlands has increased significantly since the beginning of the year, leading to more borrowing opportunities for first-time buyers. This increase in income has a greater impact than the rise in mortgage interest rates. This is good news for first-time buyers, as they often do not yet have a surplus value on a previous home and depend on their income. According to estimates by De Nederlandsche Bank (DNB), affordability for first-time buyers will improve by 4% by the end of this year compared to the end of 2021.

Another positive development for first-time buyers is the decreased competition from investors in the housing market. In many large cities today, it is only allowed to buy a home if you will live in it yourself. In addition, transfer taxes for investors have been increased, and returns are reduced when an investor home must be financed at a higher interest rate. Together, this makes startups experience less competition from this angle.

Challenges remain for housing market starters

Although opportunities for first-time buyers in the housing market are increasing, buying a first home remains a challenge. A starter household earns an average of € 67,000 per year. With a mortgage interest rate of 4%, the maximum loan is around €312,000. In comparison, the average price of existing homes in the first quarter of 2023 was around € 394,000. Moreover, the supply of available homes is still relatively limited, so competition in the housing market remains high.