The Dutch central bank has called on the government to limit the tax breaks for mortgage holders, saying the current system is damaging the country’s financial stability.

The Dutch system is one of the most generous in Europe – home owners can fully deduct all the interest from tax for 30 years – and the current government has pledged to leave it untouched.
However, the structure of the housing market makes households and banks vulnerable to shocks, the central bank said in its half-yearly report on the financial stability of the Netherlands.
Repayments
‘The large mortgage debt in the Netherlands (128% of GDP) reflects the current fiscal regime, which encourages households to take out maximum loans and make minimum repayments,’ the bank says.
While mortgage rules were tightened up earlier this year, as a logical next step, interest-only mortgages should be discouraged. This, it says, would encourage people to make higher repayments.
Politicians and interest groups were quick to condemn the bank’s proposals.
Worst idea
‘This is the worst idea you could have at the current time,’ said a spokesman for the home-owners lobby group VEH in the Volkskrant. ‘Consumers are already unsure because of the European debt crisis and the situation in Greece and this will only make things worse. This statement will create unease in the housing market.’
Junior finance minister Frans Weekers told the paper the government was committed to leaving mortgage tax relief as it is.
Opposition MPs have called repeatedly for change.