Housing market risks

Housing market risks - specifically mortgages - are an area of major importance to the financial system, as mortgages account for a large share of the total balance sheets of credit institutions and households. Hence, developments in the housing market are closely monitored by the Council.

The Systemic Risk Council monitors indicators for the development of risk in the Danish housing market. The development is summarized in the Council's press releases, when relevant. In addition, each quarter a heat map on risks in the housing market is published.

Housing loan risks

Methodology for assessing housing market risks

The Council applies information from a variety of data sources when assessing risks in the housing market. To obtain a simple, visual overview of various risk factors, the Council has developed a "heat map". The heat map is used as input along with other relevant information in the Council's assessment of whether the state of the housing market requires implementation of initiatives to counter the build-up of risks. 

In 2016 the Council invited comments on when initiatives should be taken and how it should be done. For this purpose the Council published a discussion paper and held a conference on the topic.

Housing loan risks

Recommendation on housing loans

In June 2021 the Council issued a recommendation on limiting the access to interest-only loans for highly indebted borrowers. With the measure, Danish homeowners will not be able to take out new interest only mortgage loans or mortgage-like bank loans if the loan-to-value (LTV) ratio of their home exceeds 60 per cent. The primary objective of the initiative is to make homeowners more resilient, thereby also increasing the balance sheet resilience of banks and mortgage credit institutions.

Housing loan risks

Previous recommendation on housing loans

In March 2017 the Council issued a recommendation on limiting risky loan types at high levels of indebtedness. The recommendation concerned housing loans at variable rate and/or with deferred amortisation where the borrower's total debt exceeds 400 per cent of income before tax. In October 2017, the Danish government presented new guidelines for housing loans for households with high loan-to-income levels. The Council assessed in December 2017 that the government's follow-up generally complied with the recommendation.