Interest rates encourage Danes to restructure mortgages

Large numbers of homeowners in Denmark are aiming to cash in by changing the structure of mortgages, as interest rate trends provide the potential for savings.

Interest rates encourage Danes to restructure mortgages
Homeowners in Denmark may be able to make savings by restructuring mortgages, due to current interest rates. File photo: Linda Kastrup/Ritzau Scanpix

Data from financial interest organisation Finans Danmark show that 90 percent of the 23,481 mortgage offers that were made in Denmark in October were related to restructuring of existing loans.

Many homeowners in Denmark are currently able to exploit interest rate trends by clearing their mortgages at lower repayment interest rate than the one they originally took out.

This allows the homeowners to cut part of their outstanding debt by taking out a new mortgage with higher or variable interest, replacing the previous mortgage.

At the beginning of 2022, around 400,000 homeowners had fixed-rate mortgages with interest rates of 2 percent or less and outstanding payments over 1 million kroner.

That number has fallen to 287,000 because of the number of people who have undertaken mortgage restructuring, according to the report.

READ ALSO: Should you buy now if you’re looking for a property in Denmark?

“Because of current interest rates, many homeowners with fixed-rate mortgages can reduce part of their balance by restructuring their loan,” Finans Danmark CEO Ane Arnth Jensen said in a statement on the organisation’s website.

“High interest levels mean that the rate on the underlying obligations falls and that the loans can thereby be cleared at a lower rate than they were taken out at. That can be interesting for many Danish homeowners and we are therefore seeing a high number of offers for loan restructuring or supplementary loans,” he said.

Restructuring loans may not be advantageous for everyone and individual assessments must always be made, Finans Danmark writes.

“Homeowners can switch their current fixed rate loan for a new fixed rate loan with a higher interest rate, or they can switch to a variable rate loan. The variable rate will be lower than the fixed rate here and now but the variable rate can be higher than the fixed rate loan you are coming from,” Jensen said.

“Additionally, there is a risk that the interest can increase and maybe be higher than the fixed rate loan. A higher interest will give higher repayments on the loan and that can hollow out the gains made from the restructuring,” he said.

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Danish stores got surprisingly busy on Black Friday

Online and retail trade in Denmark has recently experienced a tough few months, with consumer confidence in the economy at a record low and declining sales. But on Friday, the pessimism apparently subsided.

Danish stores got surprisingly busy on Black Friday

Both online and brick-and-mortar stores registered surprisingly good sales numbers, according to what Niels Ralund, director of e-commerce at Dansk Erhverv, told the news agency Ritzau.

“We believe that Black Friday was roughly (at) the same (level) as last year, and that is actually quite good.

“Toys have done fantastically well, books have done badly, and electronics are at the same level as last year,” Ralund added.

The payment service MobilePay also reports a lot of traffic on Black Friday.

“We ended up with a solid record day for MobilePay on Black Friday… However, the first four days of Black Week were at an even higher level because the stores have been very aggressive with good offers,” Lars Green, the commercial manager for MobilePay Online, stated in a written comment.

On Friday, goods worth a total of 881 million kroner were purchased via MobilePay in Danish stores, making the total purchase volume 19 percent higher than on Black Friday last year.