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AFM announcement concerning mortgage standards proposals

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The AFM announced, at Tuesday's press conference on the 2008 Annual Report, that it intends to tighten the rules for the provision of mortgage loans. The AFM considers this necessary to prevent consumers from running into problems as a result of mortgage payments they can no longer afford, and from running the risk of winding up with excessive residual debts in the event of the (forced) sale of the house. The rules will be tightened with respect to, among other matters, the income requirement and maximum value mortgage loans.

Outline of the proposals
The outline of the AFM's proposals is as follows: the AFM wishes to limit the number of cases in which mortgage providers grant loans that are higher than the standard, which is usually 4,5 to 5 times the annual income. The AFM's supervision has, to this day, operated on the basis of the so-called GHF standard (code of conduct for the provision of mortgage financing), which was drawn up by the mortgage providers themselves. Currently, mortgage providers are able to exceed the GHF standard in specific cases. The AFM is of the opinion that this happens much too often. The AFM therefore wishes to tighten the exemption possibilities.

The AFM is also of the opinion that the maximum value mortgage should not only be linked to the income, but also to the value of the house. A mortgage loan should not exceed the purchase value of the house. This should prevent consumers from being left with excessive residual debt in the event of premature sale of the house, for example if mortgage payments can no longer be afforded as a result of divorce or unemployment.

Consultation
In May, the AFM will elaborate how this tightening of the rules is to take shape within the current legal parameters. All interested parties will, as is usual in the event of policy changes, be afforded the opportunity to respond during consultation rounds. This policy measure to ensure tightening of the rules will be configured in close consultation with the Ministry of Finance and the sector.
The AFM is aware that the current economic situation emphasises the necessity of this tightening of the rules, but that it also demands careful implementation of these rules.


The AFM promotes fairness and transparency within financial markets. We are the independent supervisory authority for the savings, lending, investment and insurance markets. The AFM promotes the conscientious provision of financial services to consumers and supervises the honest and efficient operation of the capital markets. Our aim is to improve consumers’ and the business sector’s confidence in the financial markets, both in the Netherlands and abroad. In performing this task the AFM contributes to the prosperity and economic reputation of the Netherlands.

The AFM is committed to promoting fair and transparent financial markets.

As an independent market conduct authority, we contribute to a sustainable financial system and prosperity in the Netherlands.

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