Recommendations
22 June 2021
The Systemic Risk Council (the Council) recommends to the Government to restrict Danish homeowners' access to interest-only mortgage loans. The measure means that Danish homeowners cannot take out interest-only mortgage loans or mortgage-like bank loans secured upon real property if the loan-to-value ratio of their home exceeds 60 per cent. In 2020, just under half of the mortgage credit institutions' new lending to homeowners with a loan-to-value ratio above 60 per cent was with deferred amortisation. The initiative will entail that, in future, such homeowners would have to amortise on their loans or adjust the desired loan amount. The primary purpose of the initiative is to increase the resilience of homeowners – and the Danish economy – to falling house prices, increasing interest rates and other negative economic shocks that may impact the individual homeowner or Danish economy more generally.
22 June 2021
The Systemic Risk Council (the Council) recommends that the Minister for Industry, Business and Financial Affairs reactivate the countercyclical buffer at a rate of 1.0 per cent from 30 September 2022. The buffer was reduced from 1.0 to 0.0 per cent in March 2020 in response to covid-19. The Council finds that it is now time to rebuild the buffer.
Unless there is a significant slowdown in risk build-up, the Council expects to recommend a further increase in the buffer rate to 2.0 per cent by the end of 2021 with effect from the beginning of 2023. Phased buffer increases are in line with the Council's strategy of gradually increasing the buffer rate to a level of 2.5 per cent.