Dutch Mortgage Funding Company (DMFCO) has attracted over EUR13 billion in funding since its inception four years ago, strengthening its position as the largest independent asset manager in the Netherlands.
DMFCO has changed the way mortgages are being funded in the Netherlands, offering institutional investors access to the Dutch mortgage market and severely impacting the market share of banks and insurers.
Since operations started in 2014 DMFCO has originated over 50.000 mortgages through its bespoke mortgage label MUNT Hypotheken. The combined value of originated mortgages to date is EUR12 billion, making it one of the six largest mortgage lenders in the Netherlands. In the next years DMFCO will originate approximately EUR3-4 billion annually in Dutch mortgages.
DFMCO has transformed the capital flow to the Dutch mortgage market. Direct residential mortgage funding has become a new asset class that has currently attracted over EUR52 billion, with DMFCO as biggest and most stable player on the market. The company was formed to allow Dutch pension funds access to the residential mortgage market. Due to its low risks and high yields, with a return of 150 to 250bps above Dutch government bonds, mortgages are an attractive asset class that matches the prolonged investment horizon of pension funds and insurance companies.
The annual market for Dutch residential mortgage investment is estimated to be EUR90-100 billion, with the total Dutch mortgage debt amounting to EUR670 billion. According to the Dutch Central Bank (DNB), the size of the market will grow to EUR800-875 billion in 2025. The Netherlands is Europe’s fourth largest mortgage market, after the UK, Germany and France.
Due to stricter capital requirements, banks are being forced to limit their exposure to mortgages. At the same time banks are struggling to raise enough capital to issue mortgages, while the total mortgage debt is expected to increase. This is due to economic stability in the Netherlands combined with changing market demographics: the number of single person households is increasing and the baby boom generation is starting to sell their houses for which a younger generation need larger mortgages. This results in a funding gap, leaving room for other parties like pension funds and institutional investors who are less dependent on external finance. By cutting out banks and traditional mortgage issuers, investors profit from a higher yield while mortgage customers profit from fair interest rates.
