Refinancing behaviour by homeowners in Denmark when mortgage rates rise

Economic Memo - February 2023 - No. 2

Authors Andersen, Henrik Yde; Grenestam, Erik; Læssøe, Marcus Bjerregaard; Otte, Alexander Meldgaard; Steffensen, Sigurd A. M.
Subject Housing finance; Monetary-policy transmission; household balance sheets
Type Economic Memo
Year 2023
Published 2 February 2023
Abstract icon Rising mortgage rates have led to high mortgage refinancing activity in Denmark. The Danish mortgage system has a match-funding principle, and rising rates allow fixed-rate mortgage borrowers to buy back their mortgages at a discount. 62 per cent of this discount was used to reduce debt, while 38 per cent was cashed out. When cashing out, homeowners may become more sensitive to adverse developments in interest rates and house prices.