Realkreditsystemets betydning for det danske boligmarked

David Loft

Student thesis: Master thesis


The current low interest rates combined with the low levels of unemployment, has affected the Danish real estate market with increasing housing prices. Consequently, prices have reach a level equivalent to what we observed before the financial crisis, which in 2006 was all time high. The Danish mortgage system has a huge impact on the Danish economy in which the Danish home owners have the highest debt compared to disposable income in the OECD. Furthermore, the Danish mortgage market has changed substantially over the last two decades introducing adjusted mortgage rate loans and interest-only loans. These loans have become very popular and they constitute more than half of the outstanding debt in the mortgage market for homeowners. This makes the mortgage system much more sensitive to changes in interest rates and it has increased the volatility of housing prices. This thesis seeks to investigate the potential threats to the Danish mortgage system and further look into how the increasing regulation from legislators of both the EU commission and the Danish government influences the mortgage system. Additionally, this thesis will examine how these threats and increasing regulations will affect the Danish homeowners and the prices on the housing market. The Danish bond market almost froze after the crisis due to systematic risks in the real estate mortgage system. This have resulted in increased regulation. The regulations from the EU commission requires a stricter capitalization of the financial institutions, in order to ensure that they can withstand economic pressure by having an increased level of capital buffers. The Danish FSA introduced a supervisory Diamond for the Danish mortgage lending with restrictions on the institutions lending policy to bring down the systematic risk factors within the mortgage system. The institutions, both banks and real estate mortgage lenders, have already taken big steps to meet the requirements from the legislators, which will be fully implemented in 2019 & 2020. These regulations have made the system less systematic and safer, however there still exists several risks within the mortgage system. This is due to the liberalization of mortgage lending from the early 2000 as well as the dependence on accessing the financial markets. Furthermore, the regulations influence the business of the institutions through higher costs when holding more equity as well as specific requirements for the recognition of assets, which influences the attractiveness for the investors to hold mortgage bonds. The prospects of higher interest rates and more regulation will affect the real estate market with higher costs for the mortgage lending institutions and thereby the homeowners. Since more than half of the mortgage loans has adjusted interest rates with no repayments, there is still a huge interest rate risk for both the mortgage lending institutions and the homeowners. This may consequently lead to a higher rate of default on the homeowners’ mortgage loans, which increases the systematic risk that the legislators so desperately try to minimize.

EducationsMSc in Finance and Accounting, (Graduate Programme) Final Thesis
Publication date2017
Number of pages108