Since Dec. 1, 2016, the BKR has tightened credit rules. Even more people now have a BKR registration. This has potentially major implications for the mortgage market. What exactly has changed? And how big are those consequences?
As of December 1, the Bureau of Credit Registration (BKR) changed the rules for credit registration. The rules have become a lot stricter, greatly increasing the number of registrations. This can have a big impact on the amount people can borrow to buy a house.
Until Dec. 1, the BKR, an independent foundation, only registered current loans with a term of more than three months and a minimum amount of 500 euros. That amount has now been lowered to 250 euros and the minimum term to one month. With the tightening of the rules, the Netherlands again complies with European legislation, reports BKR spokesperson Dionne van Nieuwamerongen. But the tightening can also have major consequences for the maximum mortgage amount.
Increase in registrations
The BKR distinguishes between positive and negative registrations. Everyone who takes out a loan or buys something on credit receives a positive registration. Only in case of structural payment arrears is it converted into a negative registration. A negative registration means that it is very difficult for someone to incur new debts and therefore almost certainly does not qualify for a mortgage. As a result of the stricter rules, the number of positive registrations has increased from 7.8 million in 2016, to 9.6 million now. Of the total 10.3 million Dutch people on the BKR register, 93 percent have a positive registration. But even a positive registration is not without consequences.
Duty of care mortgage lender
When taking out a mortgage, the lender has a duty of care to check with BKR how much outstanding credit the applicant has. Depending on this, the lender takes into account that less can be repaid and the maximum amount of the mortgage is adjusted downward. "Previously, consumers were required to self-report all their burdens, but it was not exceptional for this not to be done in full," Van Nieuwamerongen said. "The mortgage rules have not changed, but the way they are checked has." Mortgage lenders keep the maximum loan amount in that check. If you can have 500 euros in your bank account in the red, the lender always treats it as a 500 euro debt. Previously, overdrafts were not registered because most banks required that there be a positive balance once every three months (the deadline for BKR registration).
Weird situations
Credit cards, buying on credit from an online store and, for example, leasing a car with a private lease arrangement also cause BKR registration. As of May 1, cell phone subscriptions with "free" handsets will also be registered; after all, this is an installment purchase. By stacking monthly costs, the reduction of the mortgage can run into tens of thousands of euros (see box). For a phone subscription, this quickly amounts to 3,000 to 4,000 euros less, calculates director Mark de Rijke of De Hypotheekshop. "In such a situation, people will start doing strange things. For example, turn off the option of being in the red with their bank and then reverse this as soon as the sale is closed."
Dynamiet Netherlands, which specializes in removing BKR registrations, is seeing a large influx of customers who are trying to shorten the term of their registration, for example, through legal proceedings. "We see a clear upward trend in the number of applications, but it is still too early to conclude that this is due to the new BKR rules, says Dynamiet's manager Deepak Thakoerdien.
Starters with student debt
Student debts are not included in the BKR registry. But when determining a person's borrowing capacity, they do count. That could have major consequences, De Rijke said. "Because of the new loan system, the number of people with student debt is rising sharply. The first of these will graduate in the next few years and enter the housing market. For an average starting couple, that could easily amount to twice 35 thousand euros, on top of any BKR registrations." Moreover, borrowing capacity has been limited in recent years, they note at De Hypotheekshop. The income test has become stricter for lower and middle incomes, fewer and fewer people are getting permanent jobs, and the maximum amount was lowered again this year to 101 percent of the home's value. "All in all, it's getting harder and harder. We expect more and more people to notice that in the coming years. And those people usually earn too much for a social rental property and thus rely on the free sector - and thus higher monthly costs."
'Rules overshoot goal'
There should be room for "standardized customization," both Hypotheekshop and Dynamite Netherlands believe. Now, the National Institute for Budget Information (Nibud) determines how much someone, based on income, can borrow. "But that involves averages and average people don't exist," says De Rijke. "Maybe there should be the possibility to explain in a conversation with the mortgage lender what the story behind that registration is," Thakoerdien adds. "Now the computer says 'no' and the deal falls through. The BKR is meant to protect people from themselves and from the financial industry. Now I think we are overshooting that goal by making the situation worse."
The BKR maintains that the registration system is in the interest of consumers and society. "Credit registration takes place to protect consumers and society from overcrediting and its consequences," Van Nieuwamerongen said. "This is only possible if the lender can make an informed assessment."
Author: Jaap Hoeve
Real Estate Current