Copenhagen Stock Exchange: Focus: Record-Breaking Prepayment Rates And Their Effect On The Danish Mortgage Credit Market

Copenhagen Stock Exchange: Focus: Record-Breaking Prepayment Rates And Their Effect On The Danish Mortgage Credit Market In Focus no. 59 Senior Analyst Janne Bjerregaard and Analyst Hasse Lucht, Danske Bank, take a closer look at the effect of prepayments over the past year on the supply and the reinvestment needs of individual investor groups.

The present remortgaging wave has caused a significant increase in the supply of bonds funding interest-reset loans and callable 5% bonds, and a plunge in the supply of 6% and 7% callable series.

In the light of the recent rise in yields and the smaller volume of prepayment- prone 6% and 7% bonds, the authors say that we are unlikely to see similar prepayment rates in coming years, and shifts in the composition of the market will be less marked. Conversely, the proportion of interest-reset loans may increase in connection with a shift to bonds with a higher coupon if borrowers in the 5% segment choose (temporarily) to switch to interest-reset loans.

To read the article "Record-breaking prepayment rates and their effect on the Danish mortgage credit market" in Focus no. 59 please click here.