Rabobank: Sights set on increasing share in mortgage market

With the Dutch housing market finally turning around, consumers have a growing number of mortgage providers to choose from. How does this affect Rabobank, the largest mortgage provider in the Netherlands? Rabobank’s Elze Vonk, who, as Head of Finance, Payments and Insurance for retail customers, is also responsible for home mortgages, sheds her light on mortgage-related trends in 2015 and 2016.

Trend 1: How Rabobank differs from other mortgage providers.

'Taking out a mortgage is a key event for many of our customers, and research shows that 95 percent of customers have a need for advice in that process. That is consistent with Rabobank's own idea of a mortgage being a long-term commitment between the customer and the provider. It means that customers, when faced with various important and less important events in their lives, must be able to adjust their mortgage to those changing circumstances. Such changing circumstances may involve anything from the purchase of a dormer window to a divorce and from a temporary reduction in income to sustainable home improvements and tapping into their home equity. It is this flexibility, combined with the fair price we offer, that makes our product distinctive in the market. Our mortgage solutions were once again given a ranking of five stars in MoneyView’s independent comparative survey. Our other strengths include our expert mortgage advisors and our online mortgage file. We are still the only provider in the world where customers and advisors use the same online system for managing mortgages. And our customers also pay lower advisory fees, since they manage a lot of their own business. That’s another unique feature we offer, one of which I am proud.'

Trend 2: Competition in the housing market.

'The housing market has really bounced back in the past year. At the same time, competition in the mortgage market has increased. The Dutch housing market is a popular investment vehicle for insurers and pension funds, as Dutch people tend to have solid, clean mortgage payment records. It’s a positive thing that consumers can choose from multiple providers and a wider range of products, as long as the differences between those products are clear. The increase in the number of providers in the Dutch market from one or two years ago will inevitably result in lower market shares for more established players such as Rabobank. Excluding our subsidiary Obvion, which holds a market share of 4 percent, our market share for 2015 averages more than 15 percent, down slightly from 2014. Our ambition is to increase our share in the mortgage market.'

Trend 3: Rabobank's mortgage rates.

'For many consumers, price is definitely a factor when purchasing a mortgage. We happen to offer very competitive rates for shorter mortgage terms. However, with interest rates being so low right now, more than half of Dutch people want to fix the interest rates for 15, 20 or sometimes even 30 years. When you're talking those kinds of terms, insurers and pension funds are able to offer more competitive rates than Rabobank – we have to deal with the strict capital buffer requirements set by regulators. We pay for the capital we are required to maintain as a buffer, and those charges increase concurrently with the term of the mortgage. When you compare our rates with those of insurers and pension funds, it is obvious that they are not subject to those same requirements.'

Trend 4: Mortgages in the Rabobank balance sheet.

'Rabobank has an excess of 160 billion euros worth of mortgages in its balance sheet. Regulators require that we maintain buffers for this purpose, and those buffers are only going to increase in the coming years. We need to strengthen our balance sheet, and one of the ways in which Rabobank intends to do this is by reselling a portion of its mortgages to investors at the back end, as announced in the presentation of Rabobank's Strategic Framework for the coming years. Other banks have been pursuing this strategy for years. We are currently exploring the most effective way to go about this. These mortgage sales will not actually affect mortgage customers as such: the mortgage agreement and terms will remain the same, and Rabobank will continue to be their point of contact.'

Trend 5: Cooperation between Rabobank and independent mortgage advisors.

'We used to work more closely with independent mortgage advisors. We scaled that back a bit in recent years, but we intend to pick up again where we left off. If we start working more closely with these independent agents again, our superior mortgage product will also reach consumers who otherwise might not have considered Rabobank as an option. We gather from independent mortgage advisors that this has been their experience as well. Around 40 local Rabobanks are currently working successfully with these independent agents, and this business accounts for more than 10 percent of our revenue. We believe there are definitely opportunities to involve more local Rabobanks and increase the number of independent mortgage advisors, including both national chains and independent service providers. Obviously, Rabobank itself will remain the most important provider of Rabobank mortgages in the future.'