2 December 2021
An increasing share of mortgage credit institutions' new loans are granted to highly indebted homeowners, especially in Greater Copenhagen and Aarhus, according to a new analysis from Danmarks Nationalbank. At the same time, more than half of the new loans to these homeowners have deferred amortisation.
If homeowners have high debt relative to the value of their home, they will be more vulnerable to subsequent house price falls. Danmarks Nationalbank therefore believes that a requirement for a larger down payment and an amortisation requirement for highly indebted homeowners will contribute to a more resilient housing market.
"In connection with the financial crisis, we saw how hard the individual homeowner, the financial sector and society as a whole can be hit by falling prices in the housing market. We believe that it will be due diligence to ensure that this vulnerability does not become too great," says Peter Storgaard, Head of Financial Stability in Danmarks Nationalbank.
Regarding corporate lending, the new analysis shows a limited amount of lending from credit institutions to the industries that have been hardest hit by the pandemic. The credit institutions have made provisions to cover losses and are well equipped to grant loans to viable companies as the government loan schemes terminate.
On Thursday, Danmarks Nationalbank also published a new stress test of the Danish credit institutions. It shows that several of the large Danish credit institutions should consider whether their capital adequacy targets are sufficient.
Enquiries can be directed to press advisor Teis Hald Jensen on tel. +45 3363 6066.