Disposable household income falls further

The real disposable income of Dutch households was 2.6 percent lower in the first quarter of 2013 than in the same period last year. This is mainly the result of the high inflation rate: prices of consumer goods rose by an average 2.5 percent. Nominal disposable income, i.e. not corrected for inflation, remained at about the same level. Partly as a result of a real decrease in income, real consumer expenditure fell by 2.1 percent. All changes in disposable income referred to in this article are moving annual totals: the figures for four quarters are combined and assigned to the last quarter.

Effects on year-on-year change in real disposable income


Household incomes failed to rise in the first quarter of 2013 because the slight increase as a result of total income from wages, social benefits and capital was cancelled out by the fall in income from production activities and higher outgoings for taxes and social premiums. A breakdown of disposable income into separate components shows that social benefits are becoming an increasingly important source of income, mainly because of the ageing population. Around 60 percent of income from social benefits originates from pensions, state paid or otherwise.
Social benefits received by households rose by 3.2 percent in the first quarter. The total amount of state pensions received rose by nearly 5 percent. The amount received in unemployment benefits rose by much more in the first quarter: nearly 20 percent. However, unemployment benefits account for a much smaller part of social benefits, around  5 percent.

Mortgage repayments again exceed mortgage loans

For the second quarter in a row, Dutch households repaid 0.8 billion euros net on mortgage loans in the first quarter of this year: they repaid more on existing loans than was taken out in new loans. At the end of the first quarter, the total outstanding mortgage debt of households was 671 billion euros.

Mortgage lending minus mortgage repayments by households


Lower mortgage debt

It is the situation on the Dutch housing market that has had the effect of net repayment of the total mortgage debt. The number of homes sold (excl. new construction) was 3.6 percent lower in the first quarter than twelve months previously, at 23 thousand. The average price of these sold homes was 8.3 percent lower. Since the peak in the third quarter of 2008, house prices (excl. new construction) have dropped by 18.4 percent. Low returns on financial assets, such as savings interest, have also played a part in this respect. The lower the return, the more attractive it is to repay outstanding debts.

Less interest paid

Household paid 8.9 billion euros in interest in the first quarter of 2013. Mortgage interest accounted for most of this. This was 2.4 percent lower than twelve months previously. The decrease in interest paid was almost completely accounted for by lower interest rates.
For new mortgages, variable interest rates are 0.7 of a percent point lower than in the same period last year. For 5-10 year fixed-term mortgages, interest rates are 0.2 of a percent point lower. Lower mortgage interest rates are often an unexpected bonus for households.

Vincent Ohm