House prices are set to drop 5.5% this year, ratings agency Standard & Poor’s said on Friday.

This makes the situation in the Dutch housing market the second worst in the eurozone, after Spain.

S&P’s says the drop is due to recent changes in taxes, the economic slump, high unemployment and falling consumer spending power, reports the Volkskrant.

However, the ratings agency thinks the Netherlands will be able to limit the drop in prices to 1% in 2014 and that prices will bottom out in 2015 as the economy gradually improves.

Mortgages

One problem in the housing market is that mortgages are too expensive, according to home owners’ lobby group Eigen Huis.

Banks are able to borrow cheap money on the capital market, while the mortgage interest rate remains unchanged. This means the profit margin for banks continues to grow while house owners are paying hundreds of euros too much, the group told the Telegraaf.

For a household with a mortgage of €250,000 this means an increase in monthly spending of over €300.