Dutch watchdog warns of interest-only mortgage dangers, but panic unwarranted

Dutch Watchdog Issues Warning on Interest-Only Mortgages

Interest-only mortgages are becoming less common but still remain widespread in the Netherlands. Financial regulators view them as risky, yet experts say most older homeowners have little reason to worry or repay early, NU.nl reported.

Scope and Risks of Interest-Only Mortgages

More than half of Dutch mortgage debt—nearly 900 billion euros—consists of interest-only loans, according to the Authority for the Financial Markets (AFM). Unlike annuity or linear mortgages, these borrowers pay only interest without reducing the principal balance.

“This can lead to problems at the end of the term,” the AFM warned.

At term end, homeowners who retire or face employment changes might struggle to repay or refinance their loans. Banks increasingly advise older borrowers to review their mortgage arrangements carefully. For instance, a 60-year-old with an interest-only mortgage expiring in ten years should not assume they can simply renew or replace it.

European Context and Regulatory Pressure

Interest-only mortgages are uncommon in much of Europe. The European Central Bank (ECB) has urged the Netherlands to phase out these loans. Sander Burgers, a housing market economist at ING, told NU.nl:

“The ECB views interest-only mortgages in the Netherlands as a risk and wants to reduce the risks for banks and their customers.”

In response, Dutch authorities have tightened conditions surrounding these loans.

Summary

While interest-only mortgages pose risks, especially at term end, regulatory tightening aims to protect borrowers and banks without causing unnecessary panic among most homeowners.

Author’s summary: Interest-only mortgages remain prevalent in the Netherlands despite regulatory warnings, but tightened rules and expert advice reduce risks for most older homeowners.

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NL Times NL Times — 2025-11-02

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