In an analysis of the Dutch residential mortgage market by Quion, it has found that, on average, prepayment speed has dropped in 2008 and the first half of 2009 compared to a year earlier.

Prepayment speed

Dutch residential mortgages typically have an interest-fixing period. During this period mortgage borrowers (homeowners) can be certain to pay a fixed interest percentage; only at the end of this period (usually ten years) will the interest rate be refixed. In the meantime, however, mortgage lenders run the risk of early, unscheduled, return of principal on what should be fixed-income. Mortgages are one such financial instrument in which this risk is high as they have embedded call options, which may be exercised by the mortgage borrower.

Benchmarks

For mortgage lenders it is important to know (in order to take evasive action) with which percentage its mortgage borrowers (will) refinance and whether this speed is higher or lower than market average. Benchmarks Quion possesses a special position in the Dutch residential mortgage market, as it oversees a great part of this market and many mortgage lenders. This way, Quion is able to make benchmarks of the Dutch residential mortgage market. It is in a position to make general statements about this market and its developments, but can also investigate the prepayment speed of a particular mortgage lender and compare this to the national average, there by taking into account the specific characteristics of the mortgage lender.