Denmark: Systemic Issues in Mortgage Loans and Covered Bond Finance: Technical Note

International Monetary Fund

No 2014/349, IMF Staff Country Reports from International Monetary Fund

Abstract: This technical note analyzes systemic issues in mortgage loans and covered bond finance in Denmark. Mortgage lending has seen significant product innovation in recent years. Loans with adjustable interest rates and/or interest-only periods, which have been introduced since the late 1990s, had grown to 75 percent and 53 percent, respectively, of total outstanding mortgage loans at the end of 2013. The major changes in the characteristics of the underlying mortgage loans have naturally been reflected in an important evolution of the covered bond market. Traditionally, covered bonds were callable annuities with maturities closely matching those of the underlying fixed rate loans. In contrast, adjustable and variable interest rate loans are financed by bonds with short maturities.

Keywords: ISCR; CR; covered bond bond market; variable rate mortgage; finance system; prepayment risk; rate loan; credit risk; mortgage lending; covered bond framework; loan prepayment; mortgage system; covered bond issuance; Covered bonds; Loans; Mortgages; Bonds; Commercial banks; Global (search for similar items in EconPapers)
Pages: 27
Date: 2014-12-18
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