The EU equates Danish mortgage bonds with government bonds. It’s an important victory. If we are to secure Danish mortgage loan in the long term, this requires that the Danish system be extended to the rest of Europe.
Mortgage bonds are equated with government bonds
Finally, after long negotiations, a solution has been found in the EU that equates the majority of Danish mortgage bonds with government bonds. Bond series of DKK 500 million EUR or more can now be used as reserves in the banks’ accounts. This avoids the banks selling large amounts of mortgage bonds and thus a higher interest rate for Danish homeowners.
Regulation has major consequences
The solution equals approx. 80% of the mortgage bonds with government bonds, but at the same time means that the last 20% no longer have the same high loan rating. This necessarily has implications for the interest rates on the mortgage market, especially for fixed-rate series, when the series over time are depleted due to withdrawals. Of course, the market will quickly incorporate these changes in prices, so that mortgage customers will probably not experience changes from one day to the next.
The small mortgage companies are hit harder than the big ones. The volume now has a much greater significance now. When companies issue new series, there must be a greater assurance that the series will not close until they reach a critical mass.
All of this may seem like technology without significance to you as mortgage loan, but that is not the case. This decision of the EU will shape, products, companies and the structure of the mortgage market in the future.
Unnecessary regulation is a half victory
This regulation can be seen as a victory for the Danish officials, politicians and especially for Margrethe Vestager. But the regulation of a well-functioning Danish mortgage loan system is basically unnecessary. Unfortunately, this is just the start of a new battle to secure a Danish mortgage loan system as an independent and equal alternative to both Danish and European banks.
When the agreement reached can be considered a victory, it is only because it could have gone much worse and ended in a disaster for the Danish homeowners. We avoided this because they were fighting in the corridors of the EU. Well fought, we have to say, but don’t put the weapons yet.
Export Danish mortgage to Europe
The only way to secure Danish mortgage loan in the longer term is to export it. Many European countries can benefit from a growth-generating alternative source of finance to the banks. Therefore, the Danish officials should contact interested parties. The most effective way to persuade other countries is to feel the positive effects of a well-functioning bond market, low mortgage rates and competition for the banks. Several Eastern European countries need this renewal.
Danish officials and politicians must therefore use the contacts in the EU countries that have been achieved over the last 5-6 years to spread Danish mortgage loan in Europe.
The agreement entered into is a good result, but now we must work on a long-term solution.