Danes’ financial wealth decreased by kr. 183 bn.

The Danes’ financial wealth, which is the difference between financial assets and debt, fell by kr. 183 billion in 1st quarter. This corresponds to a reduction of kr. 66 thousand for an average household. The decline comes after almost two years of economic upturn on the financial markets. Since 1st quarter 2020 the financial wealth has increased by kr. 2,409 billion.

Danes’ financial wealth decreased in 1st quarter
Note: The Danes’ financial wealth is the difference between the financial assets and the debt (liabilities).

Decline on the financial markets reduces assets …

The start of 2022 has been characterised by low economic growth prospects and increasing inflation. This have been accompanied by rising interest rates and falling stock markets. Large falls on the stock market have had large significance on the Danes’ financial assets which are largely invested through pension savings, investment fonds and directly in stocks. At the same time, increasing interest rates have caused the market value of bonds to decrease, which has particularly affected the Danes’ pension
wealth. In the 1st quarter the pension wealth is reduced with kr. 212 billion, corresponding to a reduction of 5 percent. At the same time, the value of the Danes’ securities (excluding pension savings) has been reduced by kr. 116 billion.

… but increasing interest rates also reduces debt

While declining markets affects the financial assets negative, increasing interest rates also contribute positively to the liabilities by reducing the market value of the Danes’ debt. The market values of the debt decreased by kr. 141 billion in 1st quarter.

Increasing interest rates causes the prices on the bonds behind the households’ mortgages to decrease. The price decreases as it become less attractive for an investor to buy bonds with a low rate. A lower price corresponds to a lower market value of the bonds, and it therefore becomes cheaper to buy back the bonds in the market which reduces the debt. However, the debt reduction will only be realized if the underlying bonds are bought back in the market. This is done, for example, by refinancing loans.

This compilation only covers the Danes’ financial assets. In addition, the total wealth also consists of the real assets, primarily real estate.