Fewer fixed-rate mortgage bonds

The market value of 30-year fixed-rate mortgage bonds fell steadily up until October this year. There are several reasons for this: The price of the bonds fell in connection with increasing market rates, while the redemption of low-yield bonds has exceeded the issuance of high-yield bonds.

Fixed-rate mortgage bond volumes decline in step with declining market value
Note: Volumes and market value of 30-year fixed-rate callable mortgage bonds from January 2021 to October 2022.

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Nominal bond volumes have also fallen. Increasing market rates and lower bond prices have contributed to some borrowers paying off their fixed-rate mortgages to reduce their outstanding debt. Also, 30-year fixed-rate bond volumes are down because not all borrowers have converted to a new fixed-rate loan, but taken out, for example, variable-rate mortgages. Moreover, bonds may be redeemed by people selling their homes etc.

Fixed-rate mortgages are particularly popular with households, which account for 74 per cent of fixed-rate mortgages and more than 90 per cent of redemptions.

Nominal bonds down kr. 121 billion

Since the start of the year, there has been a fall of kr. 312 billion in the nominal value of 30-year mortgage bonds offering a fixed coupon rate of 2 per cent or less. Bonds offering a higher coupon rate – especially bonds offering a coupon rate of 4 per cent – have increased by kr. 191 billion. This equates to a net decrease of kr. 121 billion and a total value of fixed-rate bonds of kr. 1,040 billion.

For fixed-rate bonds as a whole (not just 30-year bonds), a total of kr. 368 billion has been redeemed in 2022, which is surpassed only by 2019, when kr. 378 billion was redeemed in the same period.

Refinancing of mortgages is not free

Borrowers who choose to restructure their mortgages to reduce their outstanding debt should factor in the fact that the interest payable on the outstanding debt increases if they convert to a fixed-rate loan with a higher interest rate. And converting to a variable-rate mortgage comes with the risk that the variable interest rate may increase in the future.