Danske realkreditlåntageres risikobillede: Med fokus på den stigende andel af rentetilpasningslån i en økonomisk usikker tid

Abstract

This thesis sets forward to study why Danish mortgage lenders on a large scale chose adjustable rate mortgage over fixed rate mortgages in a time of great economical difficulties. The thesis will introduce a calculation model, which can be used in finding the potential costs and show the risks associated with choosing adjustable rate mortgages over fixed rate mortgages.. Over the last decade the total volume of debt accumulated by the mortgage lenders have shown a steady increase. Today the market values on outstanding mortgage backed securities have reached DKK 1.335 billion. Over the same period of time the predominated residential mortgage form has made a switch from fixed to adjustable rate loans, and today the market share of adjustable rate loans have reached over 60% of the total market value. In addition the market share of interest only loans has reached close to 80%. At present time the trend is proving dangerous for the homeowners. The lack of amortization increases the risk of insolvency when house prices declines as experienced in the current housing market. As of the moment no statistical data shows precisely how many homeowners are experiencing technical insolvency, but the general consensus is that the number is increasing, especially amongst the young homeowners. As an indicator of how well the mortgage borrowers will be able to survive a possible increase in debt services, this thesis concludes that the average homeowner is well of and financially secured, however there will be certain groups of homeowners who will be challenged if the interest rate were to rise with 2-3% in coming time. Evidence point towards some homeowners already is having difficulties in making payments on their mortgages. The rate of foreclosures has increased the last two years, but the numbers are still far from the highs experienced under earlier housing crises in the eighties and nineties. Empirical evidence shows that the choice between fixed and adjustable rate mortgages in part can be explained by looking at the interest spread between the short and the long term interest rate. The correlation between interest spread and the total share of adjustable rate mortgages shows, that when the interest spread expands the share of loan conversions from fixed to float rate tend to increase. Thus indicating that price is the most important factor when homeowners chose there mortgage loan.