Consultation response regarding the draft amendment to the executive order on good business practice for mortgage lending

Authors Danmarks Nationalbank
Subject Consultation respons from Danmarks Nationalbank
Type Consultation Response  
Year 2017
Published 20 November 2017
The suggested amendment limits the product supply for homeowners with a total debt-to-income, DTI, of more than four and a loan-to-value, LTV, of more than 60 per cent. Danmarks Nationalbank finds it positive that the rules apply to all homeowners with high debt in proportion to income, regardless of the zip code of the property. On the other hand, Danmarks Nationalbank finds it inappropriate that highly indebted homeowners will still be able to finance housing purchases using deferred amortization loans. Restricting the possibility to obtain deferred amortization financing would reduce the vulnerability of homeowners to negative economic shocks such as declining house prices and unemployment, just like a higher monthly debt service would reduce the risk of short-sightedness due to low interest rates.