Slowdown in homeowners’ mortgage debt

At the end of November, Danish homeowners had mortgage debt of kr. 1,799 billion, which is 0.31 per cent (kr. 5.6 billion) less than a year ago. It is the first time since 1994 that the year-on-year development in homeowners’ mortgage debt has been negative.

Major slowdown in the growth of homeowners’ mortgage debt in the past year
Note: The chart shows year-on-year growth in per cent of the nominal value of mortgage lending to Danish house-holds (sector 1400) with collateral in owner-occupied homes and holiday homes.

|

The development in the Danes’ mortgage debt helps, together with property prices, to shed light on key trends in the housing market. For a number of years, the development in the debt level has been increasing, but has turned to a decrease during 2022. It comes at the same time as rising interest rates, many conversions and falling property prices.

Higher interest rates and conversions contribute

Rising interest rates have given many homeowners with fixed-rate mortgages the opportunity to convert their loans. By converting loans with a low fixed interest rate, homeowners can reduce their nominally outstanding mortgage debt against taking out a new loan with a fixed or variable interest rate that reflects the current interest rate level. In 2022, homeowners have up to and including September converted fixedrate loans for approximately kr. 173 billion. The homeowners have spent approximately 60 per cent of the realised capital gain to reduce their bank and mortgage debt.

The higher interest rates have also meant more expensive financing of house purchases and thus contributed to falling prices on the housing market. Lower housing prices will, all else being equal, mean that less must be borrowed to buy a new home, which also contributes to dampening growth in mortgage debt.

The development is geographically broadly based

In the growth areas (Copenhagen and surroundings and Aarhus), which historically have had higher mortgage growth rates than the rest of the country, year-on-year growth has fallen by more than 6 percentage points over the last year to 0.76 per cent in November. In the rest of the country, mortgage debt has been reduced by 0.78 per cent over the past year. Homeowners’ mortgage debt in the growth areas is calculated at kr. 555 billion, while for the rest of the country it is kr. 1,244 billion at the end of November.