Klaas Knot: Mortgage interest tax deduction in the Netherlands - a welcome relief

Speech by Mr Klaas Knot, President of the Netherlands Bank, at the Macroprudential Policy Conference "Real estate taxation and macroprudential policy", Vilnius, 2 July 2019.

The views expressed in this speech are those of the speaker and not the view of the BIS.

I'm glad I have the opportunity to exchange views here with you about this important topic. But to be honest, I'm also a little bit surprised that it's me who has been invited as a Keynote speaker. When it comes to macroprudential policy and real estate taxation, it seems the Lithuanians do a far better job than we do now in the Netherlands, and certainly than we did in the past. While our Loan-to-valuelimit still stands at 100% and mortgage interest deduction (MID) is the most generous in Europe, the Lithuanian LTV-limit stands currently at 85%. And mortgage interest deduction was abolished already in 2009.

I can imagine that for the next edition of this conference it would therefore be more appropriate to invite Vitas to Amsterdam, so I can make notes on what he has to say. Nevertheless, let me be so free to share some of my thoughts and experiences with every one of you. Let's together build on a collective set of lessons learned. Previous crises and downturns have shown us that residential real estate markets are an important concern for both financial and macroeconomic stability. This not only holds for my country, where the drop in house prices starting in 2009 severely prolonged the economic downturn. It is probably also true for a country like Lithuania, where 90% of all households are owneroccupiers.