In one third of the mortgage advice conversations with first-time buyers, the adviser does not ask about the existence of a student loan. This is apparent from the most recent figures from the consumer monitor of the Netherlands Authority for the Financial Markets (AFM) that has been requested from this site.
In 2019 and 2020, respectively, 46 and 47 percent of the applicants indicated that they did not have to disclose information about a student loan to be paid off. Although there are fewer now, there is still room for improvement, according to the AFM. Recently, the financial watchdog argued in favor of including the student loan with the Credit Registration Bureau (BKR) to prevent debts from not being taken into account when determining the maximum loan amount.
The AFM conducts annual consumer surveys in order to include the experiences of consumers in its supervision. This year, one in three of the 106 consumers surveyed said their mortgage adviser did not explicitly ask if student debt was involved. 2 percent of them did have a student loan.
Earlier research by Viisi already showed that 15 percent do not have a student loan, which means that they can borrow more money for the purchase of a house. However, they also run greater risks. This makes it more difficult for them to bear the monthly costs and the National Mortgage Guarantee lapses in the event of a forced sale of the house.
‘Advisor often already knows’
According to Colinda Rosenbrand, chair of the Organization of Financial Service Providers, there is a good explanation why a large number of advisers do not ask about student debt. “In certain cases, the adviser may not have asked about student debt because he could deduce from all other data, such as bank statements or previous statements from the client, that there was no student debt. Or perhaps the adviser could conclude that a student loan would not stand in the way of a responsible mortgage.”
Rosenbrand does not think that the subject of student debt is deliberately avoided by advisers. “I have absolutely no reason to think that our members are not aware of the fact that they have to take student debt into account when assessing the financial position of the client. The figures show that of the cases in which a student loan was not asked, the vast majority had no debt at all.”
The high percentage surprises Hendrik Schakel, mortgage advisor and co-founder of Viisi. “Look, I can understand that you don’t ask about a student loan from a 65-year-old. Still, you have to be careful. Because student debts can haunt someone for a long time, it is also good to ask customers of 50 about debts that are not registered with the BKR.”
A colleague received a message from a lender that there was a student debt of 90,000 euros. This was not noticed in the documents supplied at first
According to the advisor, asking once is not enough. “Mortgage applicants can simply always answer no to questions about student debt,” says Schakel. “In principle, there are two parties that check the application: us as advisers and the lender. Recently a colleague of mine received a message from a lender that there was a student debt of 90,000 euros. This was not noticed in the documents submitted at first.”
Student debt affects mortgage amount
The influence that a student loan has on the amount of a mortgage has been discussed for years. The AFM recently recommended that the debts be included in the BKR register. In this way, mortgage advisers can relatively easily gain insight into the financial debts of applicants. Outgoing Minister of Education Ingrid van Engelshoven ignored the advice: BKR registration could have a deterrent effect, so that fewer young people would choose to study.
Rosenbrand of the Organization of Financial Service Providers agrees with the AFM that there should be a central register. ,,A registration with the BKR is the best and most logical option. An alternative is, for example, a statement of debt from Duo, but then you are dependent on the permission of the customer, while we already have an excellent system of debt registration with the BKR.”
Mortgage advisers are legally obliged to take into account existing financial obligations when determining the maximum mortgage amount. Mortgage applicants also have the obligation to pass on a student loan themselves. With the conditions of student loans and in view of the social purpose, these debts weigh less heavily in determining the maximum mortgage than a normal debt. But it can still add up quite a bit. With a student debt of 20,000 euros, roughly 40,000 euros less can be borrowed. That can make the difference whether or not you can buy a house as a former student.
The current practice, whereby an applicant usually submits a screenshot of the Duo website showing the amount of the student debt, is also unnecessarily cumbersome according to the AFM and does not promote compliance with and enforcement of the applicable regulations regarding responsible mortgage provision. That is why the AFM would like to see student debts registered. “This makes the existing legal rules more enforceable for mortgage providers and advisers,” argues Yolanda Bieckmann on behalf of the Authority.
Want to know more about mortgages? Listen to the podcast Onder de Pannen in your favorite podcast app or below.
Watch all our videos about the economy here:
Free unlimited access to Showbytes? Which can!
Log in or create an account and don’t miss out on any of the stars.