Statistical news focuses on the latest figures and trends in Danmarks Nationalbank’s statistics. Statistical news is targeted at people who want quick insight into current financial data.
Danish Homeowners Pay Off Less on Their Mortgage Debt
The ordinary instalments on Danish homeowners’ mortgage debt with security in owner-occupied houses and summer houses has decreased. On average, the homeowners paid off kr. 10,131 per million borrowed in the first half of 2023. That is kr. 1,202 less than in the first half of 2022 and corresponds to a decrease of 10.6 per cent. The decreasing trend since 2020 is related to factors like increasing interest rates, a newer debt, and less debt with instalments that all influence how much is paid off.
On Average, Danish Homeowners Paid off kr. 10,131 per Million Borrowed in First Half of 2023
Note:
Ordinary instalments per million borrowed for Danish households with security in owner-occupied houses and summer houses. Instalments per million borrowed is the instalments in each period relative to the debt and then multiplied with 1 million. The higher instalments in 2nd half of 2016 and 2017 is a result of several standing loans that expired.
Higher Interest Rates, Lower Instalments
The aggregated payment of a mortgage loan consists of interest and administration payments and instalments on the debt. When the interest payments increase the instalment profile of the debt typically becomes steeper. That means instalments will be lower for a period and make up for a smaller part of the aggregated payment.
Variable rate loans are interest rate adjusted with a fixed frequency. Hence, many homeowners with variable rate loans have received a higher interest rate on their loan if it has been interest rate adjusted at some point during the last year. These homeowners now pay substantially more in interests on their loans.
Homeowners with fixed rate loans are secured a fixed interest rate during the full maturity of the loan. Hence, homeowners with for example a fixed rate loan with a 1 per cent interest rate will not feel the consequences of the higher interest rates on the size of their ordinary instalments.
Newer Debt, Lower Instalments
The remaining maturity of the mortgage debt becomes increasingly important when interest rates are higher. This is due to mortgage loans often being annuity loans where instalments make up for a smaller part of the aggregated payment in the beginning of the maturity of the loan.
In 2022, many homeowners chose to exploit the increasing interest rates and restructure their loan. As part of the restructurings older loans have been repaid and new loans have been raised. On its own this contributes to a younger total mortgage debt and a longer remaining maturity, which results in lower instalments. As part of the restructurings many homeowners reduced their debt and some also chose another type of loan1.
Less Debt with Instalments
The total mortgage debt of homeowners has been reduced during the last year and the part of the debt that is with instalments has decreased by kr. 37 billion while the interest-only part of the debt only decreased by kr. 13 billion. Thus, the homeowners pay instalments on a smaller part of the debt compared to a year ago. This also contributes to the decrease in instalments. At the end of June 2023, 51.6 per cent of the homeowners’ debt was with instalments, which is 0.6 percentage points lower than a year ago.
At the end of June 2023, approximately 6 out of 10 homeowners have interest-only debt. Thus, a smaller part of the homeowners pays the instalments on the debt. If we solely consider debt with instalments then these homeowners on average paid kr. 19,619 in instalments per million borrowed at the end of first half of 2023, which is kr. 2,068 less compared to a year ago.