Mortgage guarantee limit massively outpaces what homebuyers can afford to borrow

Last week, the National Mortgage Guarantee (NHG) announced that it was raising its limit to €500,000 to more closely reflect actual home prices. While that offers more buyers access to the safety net the NHG provides, it is far more than the average homebuyer can borrow, according to an analysis by De Hypotheker.

“It is a positive development that the NHG limit is rising in line with increasing house prices. This allows more homebuyers to benefit from the financial security and potential interest rate discounts that the NHG provides. At the same time, our analysis shows that the financial capacity of buyers does not necessarily grow at the same pace,” said Mark de Rijke of De Hypotheker.

The NHG limit increased by 41 percent between 2022 and 2027, from €355,000 to €500,000. The average mortgage amount grew by only 9 percent from 2022 to the present, rising from €330,000 to approximately €361,000.

Homebuyers also need a significantly higher income to take full advantage of the maximum NHG limit. In 2022, couples needed a gross annual income of approximately €73,500 to afford a mortgage equal to the then-current NHG limit, with a mortgage interest rate of 1.55 percent. For the new limit that takes effect on January 1, with a mortgage interest rate of around 4.46 percent, a couple will need to earn €110,000 a year - an increase of no less than 50 percent.

Data from Statistics Netherlands (CBS) shows that collective labor agreement wages rose by nearly 31 percent between 2020 and the third quarter of 2026. But that increase was almost entirely canceled out by inflation. Consumer prices increased by approximately 29 percent during the same period.

The difference is also evident in the gross monthly costs. For a 30-year annuity mortgage in early 2022, a buyer would have paid a gross monthly amount of around €1,237 on a €355,000 mortgage. A €500,000 mortgage at a current interest rate of 4.46 percent will cost around €2,538 gross per month.

“Despite rising incomes, higher house prices and increased mortgage interest rates mean that many households still struggle to finance a suitable home. This remains a major challenge, particularly for first-time buyers and middle-income earners,” De Rijke said.

“While a higher NHG limit offers more options, it ultimately says little about actual affordability. In the end, it is one’s income and the current mortgage interest rate that determine how much an individual can actually borrow.”