The Dutch national bank has called for tax relief on mortgage payments to be scaled back further by the government that takes office after the March election.

Job Swank, executive director of monetary affairs and financial stability, said the ‘generous loan subsidy’ was exposing the Dutch economy to unnecessary risk. The overheated housing market in the first decade of the century led to a sharp drop in prices following the 2008 financial crisis.

De Nederlandsche Bank (DNB) said the current boom in property prices was driving the current economic recovery, but warned that in the longer term it could bring instability. ‘At the moment the Dutch economy is either racing ahead or standing still. We need to get away from that,’ he said.

Investment in housing increased by 27% in 2015, equivalent to an extra 0.5% in GDP, and rising house prices were reflected in increased consumer confidence in higher spending, DNB said.

The bank estimates that the economy as a whole will grow by 2.3% in 2015, while unemployment will fall below the half a million mark and the budget deficit is also forecast to shrink further.

Swank said the historically low interest rates gave the government an opportunity to restrict mortgage tax relief (hypotheekrenteaftrek) for all homeowners, not just new borrowers. The current cabinet has already agreed to bring the maximum level from 52% to 38%.

‘Compared to other countries we have always been very generous in the Netherlands,’ said Swank. ‘If you look a the very low mortgage interest, this is the right moment to think about these measures.’

He also called for more affordable rental homes to be built to provide a viable alternative to owning a home.