Danish homeowners refinance loans as interest rates rise
An increasing number of homeowners in Denmark are restructuring their mortgages due to changing interest rates.
Lenders made nearly 13,700 offers to restructure homeowners’ mortgages in the month of April alone, news wire Ritzau reports based on an analysis by financial sector interest organisation Finans Danmark.
Private homeowners and businesses alike have shown interest in restructuring their loans, according to the report.
Higher interest rates in recent months form a key part of the explanation for the trend.
When interest rates rise, the price of the bonds behind the loans will fall and can therefore be redeemed at a lower rate than they were taken out at.
As such, a homeowner can choose to convert their fixed-rate loan into a higher-rate one and thereby cut their outstanding debt.
“That restructuring formed the majority of loan offers in April is testament to the fact that this is something that interests homeowners,” Finans Danmark CEO Ane Arnth Jensen said in a press statement.
As of May 16th, the interest rate on a fixed-rate loan is 3.5 percent, up dramatically from 1.5 percent at the end of 2021 and 0.5 percent at the start of 2021.
“Currently, it is especially for homeowners with loans of 0.5, 1.0 and 1.5 percent where a conversation (about restructuring their mortgage) would be worth considering, as they can cut a good chunk off the residual debt,” Brian Friis Helmer, private economist at Arbejdernes Landsbank, told Ritzau.
“Where things usually would have revolved around reducing interest, homeowners are going up in interest on this occasion,” he added.
The Finans Danmark analysis shows that businesses have also joined the wave of loan restructuring to secure their real estate.
1,900 businesses requested mortgage offers in April with a view to restructuring their property loans.
READ ALSO: ‘Prove you’re going to stay’: The challenges of buying a home in Denmark as a foreigner
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Lenders made nearly 13,700 offers to restructure homeowners’ mortgages in the month of April alone, news wire Ritzau reports based on an analysis by financial sector interest organisation Finans Danmark.
Private homeowners and businesses alike have shown interest in restructuring their loans, according to the report.
Higher interest rates in recent months form a key part of the explanation for the trend.
When interest rates rise, the price of the bonds behind the loans will fall and can therefore be redeemed at a lower rate than they were taken out at.
As such, a homeowner can choose to convert their fixed-rate loan into a higher-rate one and thereby cut their outstanding debt.
“That restructuring formed the majority of loan offers in April is testament to the fact that this is something that interests homeowners,” Finans Danmark CEO Ane Arnth Jensen said in a press statement.
As of May 16th, the interest rate on a fixed-rate loan is 3.5 percent, up dramatically from 1.5 percent at the end of 2021 and 0.5 percent at the start of 2021.
“Currently, it is especially for homeowners with loans of 0.5, 1.0 and 1.5 percent where a conversation (about restructuring their mortgage) would be worth considering, as they can cut a good chunk off the residual debt,” Brian Friis Helmer, private economist at Arbejdernes Landsbank, told Ritzau.
“Where things usually would have revolved around reducing interest, homeowners are going up in interest on this occasion,” he added.
The Finans Danmark analysis shows that businesses have also joined the wave of loan restructuring to secure their real estate.
1,900 businesses requested mortgage offers in April with a view to restructuring their property loans.
READ ALSO: ‘Prove you’re going to stay’: The challenges of buying a home in Denmark as a foreigner
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