Effects of further reductions in the LTV limit

Abstract

The statutory loan-to-value (LTV) limit for residential 5 mortgage loans was introduced in the Netherlands in 2012. This LTV limit is being reduced by one percentage point per year, from 103% today to 100% in 2018. The government has stated that a further reduction in the LTV limit is desirable in due course.1 This is in line with the recent recommendations made by the IMF and the Wijffels Commission, which advocate further reduction of the LTV limit to 80%.2 In this context, the Financial Stability Committee (FSC) is discussing the desired structural level of the LTV limit and the pathway to achieving this.