Refinancing has boosted the interest rate pass-through to fixed-rate mortgages

Analysis - April 2021 - No. 8

Authors Hensch, Jonas Ladegaard
Subject Monetary policy; Monetary-policy transmission; Rates and foreign-exchange; Housing finance
Type Analysis
Year 2021
Published 12 April 2021
Abstract icon Half of homeowners in Denmark finance their mortgages via fixed rate loans. Danish fixed rate mortgages are special, as they can be re-financed without the outstanding debt being significantly increased. This makes refinancing attractive when interest rates decrease. Declin-ing interest rates since the financial crisis have implied that many homeowners have refinanced their fixed rate mortgages to lower rates. This has increased the interest rate pass-through and thus supported the transmission of monetary policy rates to homeowners' budgets.