Taking out second mortgages: a statistical analysis of spending and risks

This research memorandum analyses the results of a survey among mortgage owners by order of the Nederlandsche Bank. The questionnaire considers spending financed by taking out second mortgages and expectations about future developments on the housing and mortgage market and the tax relief of mortgage interest payments. The survey shows that the boom on the housing market is accompanied by sizeable spending on home improvement and consumption financed by taking out second mortgages; these expenditures are estimated to have risen from about NLG 4 trillion in 1996 to roughly NLG 14 trillion in 1999. This has led to a strong impulse to economic growth in the Netherlands. Besides, the survey reveals that notably young mortgage owners, mostly first-time buyers of a house, are financially more vulnerable.