Expiring interest-only mortgages have implications for household expenditure
Analysis - February 2020 - No. 2
Interest-only mortgages are very popular in Denmark, currently making up 45 per cent of outstanding mortgage volumes. These loans allow homeowners to postpone repayment on the mortgage principal - typically for up to 10 years after origination - reducing monthly instalments for a period of time. A small share of borrowers need to cut spending in order to fund the rise in mortgage instalments when the 10 year amortization-free period ends. This analysis show that the reduction in expenditure is substantial for the affected homeowners but the overall effect on the Danish economy is very limited.