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Danish mortgage arrears increase as costs go up

A higher number of Danish homeowners are finding it difficult to meet the repayment schedule on their mortgages, new figures show.

Published: 1 February 2023 07:40 CET

Danish mortgage arrears increase as costs go up

The overall arrears percentage for Danish mortgages was slightly up in late 2022. File photo: Simon Skipper/Ritzau Scanpix

Data from the interest organisation from banks, Finans Danmark, shows that the “arrears percent” or restanceprocent was 0.14 percent in the third quarter of 2022, a small increase compared to preceding quarters.

That means homeowners on average did not pay 1.4 kroner in every 1,000 kroner they were due to pay on their mortgages during the quarter.

It is understandable that late 2022 presented challenges for homeowners, an analyst said in comments to news wire Ritzau.

“It’s a good sign of health that homeowners are proving themselves to be solid repayers,” Brian Friis Helmer, private economist with Arbejdernes Landsbank, said in a written comment.

“Because homeowners are in the middle of a time in which increasing interest, higher energy prices, and generally high inflation make life as a homeowner more expensive than we have seen for many years,” he said.

The arrears percent reflects that proportion of total repayments from homeowners which has not been paid three and a half months after the payment deadline.

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Home sales in Denmark sink to lowest level since 2013

Only 9,931 homes were sold in the last three months of 2022, according to the latest figures from the trade body Finance Denmark, the lowest number for 39 three-month periods. At the same time prices have fallen back to the levels they were at at the end of 2020.

“The second half of the year in particular showed a marked decline in housing transactions,” Brian Friis Helmer, economist at Arbejdernes Landsbank. “The headwind comes from higher interest rates, higher energy bills and financial uncertainty.”

Prices of apartments fell by 7.2 percent last three months of the year compared to the same period in 2021, while prices for detached houses fell by 6.3 percent.

Bo Sandberg, housing economist at the Confederation of Danish Industry, said that this made Denmark one of the European countries which had seen the biggest falls.

“We are pretty much only exceeded by Sweden,” he wrote in a commentary. “The peak of the price increases, which occurred during an exceptionally favourable and historically unique period in the housing market, has now been shaved off, and prices are back at the 2020 level.”

A survey of Danish home owners carried out by Finance Denmark in February 2023 found that a slim majority of 55 per cent expected prices to remain stable over the coming 12 months, with only 20 percent expected prices to drop more than 1 percent.

This compared to 30 percent who expected a drop of more than 1 percent a year ago.

Only 2.9 percent of home owners expected a fall of more than 5 percent, while 13 percent expected prices to rise over the next year, with 4.5 percent expecting a rise of more than 5 percent.

“Energy prices have fallen significantly in recent months, and consumer prices are not rising as quickly as in the past. At the same time, more people have probably got used to the higher level of interest rates,” Ane Arnth Jensen, deputy managing director of Finance Denmark, said in a press statement.

“This may be part of the explanation for the fact that the Danes expect the future to be a little brighter, and many expect a calmer housing market in the coming year. But whether that will happen, only time will tell.”

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