In Focus no. 42 Thomas Kyhl, Jacob Nielsen and Martin Gregersen, Danske Bank, look at Danish home owners' choice of financing and how they take advantage of the low interest rates.
The authors conclude that the fall in interest rates has inspired many homeowners to reflect on whether the financing option they originally chose is still the right one, and that has led to heavy refinancing activity. Moreover, homeowners have become more vulnerable to rising interest rates after the introduction of variable-rate financing in the 1990s. Denmark's restrictive mortgage credit system will protect bondholders well if the financial stability of borrowers decreases. And the Danish mortgage banks are well positioned to protect bondholders if bad debts should increase - their capital base has increased considerably in recent years. Also, no mortgage bank has ever gone bankrupt since the mortgage finance system was created more than 200 years ago, the authors finish the article.
Read the entire article "Danish home financing - a widening range of loan options" in Focus no. 42 by clicking here.
