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Dutch households not as 'tight' as you might think07 February 2013, by Mark McDaid
Despite the economic crisis the amount of money which Dutch households are saving is on the rise, but this does not mean that the disposable income of these households has also increased. Quite the opposite, reports De Nederlandsche Bank (DNB).
Recently released statistics have shown a solid decline in non-contractual savings over the past 13 years while the amount of savings Dutch households have deposited in banks has been on a higher level than those seen during the early 1990's. In fact, since 2003 savings deposits have increased by more than 120 billion euros.
Though often seen as a country of thrifty savers, the Netherlands has this image projected upon it by the compulsory pension schemes which increase the amount of savings made by the country as a collective. By examining the statistics from the perspective of individual households it is clear that this thrifty stereotype is not entirely justified.
Calling it a "Dutch savings paradox" the DNB feels it can be explained by the increasingly popular tactic of releasing equity from properties owned by Dutch families. They cite the huge increase in mortgage debt over the past 20 years as an example of this.
While in the 1990's, when house prices were rising to astronomic levels, it was common for people to take out a second mortgage in order to deal with their debts.
However, since 2000 this has no longer been a viable option as tighter laws controlling mortgage interest tax relief have been put in place.
The subsequent fall in house prices since the beginning of the financial crash in 2008 has forced Dutch households to look to the release of equity in order to fund their lifestyles.
Such tactics are unlikely to continue for too long though. The DNB sees the key demographic in this pattern to be senior former home-owners and those who will benefit from their assets when they move out into rented accommodation towards the end of their lives.
Without a significant increase in house prices in the coming years there will be fewer senior citizens with a large amount of home equity to release to their beneficiaries and therefore less room for maneuver in Dutch households and the thrifty stereotype may be forced to make a harsh return.