Source: Danmarks Nationalbank
Increases in the second and third quarters pull the year towards zero
The growth in Danes’ housing debt has generally been slowing since 2022, when interest rates began to rise sharply. In addition to putting a natural dampener on loan demand when it becomes more expensive to borrow, the rising interest rates have also given many borrowers the opportunity to pay off their fixed-rate mortgages at a low rate and thereby reduce their residual debt. The repayment of their existing loans and taking on of new smaller loans have therefore overall contributed negatively to lending growth. However, rising interest rates also pull in the opposite direction, as an increase in interest rates typically means that the interest payments make up a larger part of the homeowner’s payment on their loan. This means that instalment payments become smaller. As a result, the debt is not reduced at the same rate as if interest rates were lower.
After a period of fairly stable interest rates for the majority of the first half of 2024, lending rates fell in the third quarter, which was also marked by Danmarks Nationalbank’s two interest rate cuts. Homeowners increased their housing debt by kr. 8.8 billion in the quarter. Compounded with the second quarter’s modest lending growth, this only just offsets the development in the first quarter of the year, where debt was reduced by almost kr. 11 billion. Despite the so far very limited total lending growth in 2024, there may be a prospect of the year ending in the positive. About a quarter of the banks and mortgage credit institutions that participate in Danmarks Nationalbank’s lending survey expect that the demand for loans will increase slightly in the fourth quarter.
Greater interest in F5 loans
The recent interest rate developments have also had an impact on Danes’ preferences for the length of the loan’s interest rate fixation period when they choose a new mortgage loan with a variable interest rate. In the third quarter, homeowners have increasingly taken out F5 loans, where the average interest rate incl. contributions on loans that were taken out in September was around 1.5 percentage points lower than on both short-term and fixed-rate loans. The F5 loan has thus gone from making up approximately 20 percent of all new mortgage loans with variable interest rates in the first half of the year to a total of 31 percent in the third quarter.